What is a cash flow statement?

1. The statement of cash flows shows inflows and outflows of cash for an enterprise over an accounting period.

2. Cash inflows represent generation of cash, and cash outflows represent cash usage or spending.

3. Total cash flows of a firm are the sum of cash flows arising from operations, investment and financing activities. Each tells us how much cash is moving in and out due to each activity, and how that pattern has changed over time.


4. It measures how well a company manages its cash position, how it generates cash to pay its debt obligations and fund its operating expenses.

5. Cash flow statements are prepared on a cash-basis, while other financial statements use accrual-based accounting.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)