Cash Flow Statement
A cash flow statement is a financial report that shows how much cash a company has generated or used over a specific period of time. The cash flow statement can be used to assess a company’s financial health and its ability to generate cash in the future.
The cash flow statement has three main sections: operating activities, investing activities, and financing activities. Operating activities include cash inflows and outflows from the company’s day-to-day operations. Investing activities include cash inflows and outflows from the purchase or sale of long-term assets, such as property or equipment. Financing activities include cash inflows and outflows from the issuance or repayment of debt and equity instruments.
Thecash flow statement should be prepared using accrual accounting principles, which means that revenues and expenses are recognized when they are earned or incurred, regardless of when thecash is actually received or paid. This provides a more accurate picture of a company’s true cash position than the traditional Cash basis of accounting, which recognizes revenues and expenses only when thecash is received or paid.