What is a cash flow statement?
Reem Heakal, Investopedia.com | February 02, 2009 Complementing the balance sheet and income statement, the cash flow statement, a mandatory part of a company’s financial reports since 1987, records the amounts of cash and cash equivalents entering and leaving a company. The CFS allows investors to understand how a company’s operations are running, where its money is coming from, and how it is being spent. Here you will learn how the CFS is structured and how to use it as part of your analysis of a company. The structure of the CFS The cash flow statement is distinct from the income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit. Therefore, cash is not the same as net income, which, on the income statement and balance sheet, includes cash sales and sales made on credit. Cash flow is determined by looking at three components by which cash enters and leaves a company: core operations, investing and
In financial planning, there are two statements of paramount importance: your net worth statement (NWS) and your cash flow statement (CFS). The two are linked. If you manage your personal cash flow well, then you will consistently generate a cash flow surplus. At the end of each ‘accounting period’, be it one day, one week, one month or one year, your surplus cash is reflected as a fattening cash balance in the asset column of your NWS!
