Question

What is meant by Cash Flow Statement?

Hint:

The Cash Flow Statement is crucial for understanding a company's cash position, which is not always reflected in the Income Statement or Balance Sheet.

Answer 1

A Cash Flow Statement is a financial statement that shows the inflows and outflows of cash and cash equivalents during a specific period. It provides insights into the company’s ability to generate cash to meet its obligations and invest in its operations. The Cash Flow Statement is divided into three sections:

Operating Activities: This section shows the cash generated or used in the company’s core business activities, such as cash receipts from customers and cash payments to suppliers and employees.
Investing Activities: This section reports the purchase and sale of physical and financial assets, including property, equipment, and investments.
Financing Activities: This section includes cash flows related to borrowing, repaying loans, issuing shares, and paying dividends.

Conclusion: The Cash Flow Statement is a key financial statement that helps assess the liquidity and overall financial health of a business by analyzing how cash moves in and out of the company.