A Cash Flow Statement is a financial document that outlines how a business generates and expends cash. The document categorizes all cash activities into three essential segments: Operating Activities, Investing Activities, and Financing Activities.

Operating activities are those that involve day-to-day operations like sales and payment processing. These activities typically result in either an inflow or outflow of cash.

Investing activities include the purchase or sale of long-term investments such as stocks, property, and equipment. This type of activity is generally associated with a negative outflow of cash.

Financing activities include obtaining debt or equity capital to maintain operations, as well as payment of dividends. Financing activities have the potential to both raise and reduce a company’s total cash position.

By analyzing cash flow statements on a regular basis, businesses can easily track their economic health and make well-informed decisions while being mindful of their overall financial objectives.