A cash flow statement is a report that details how a company receives and spends its cash. These are also called cash inflows and outflows.
A company can only operate as long as it has the money to cover its expenses. Cash flow reflects a company’s ability to operate in both the short- and the long-term, and is used by investors, creditors, and regulators to determine whether a company is in good financial standing.
Cash flow statements are typically split into three sections:
- Operating activities, which details cash flow generated from the company delivering upon its goods or services, including both revenue and expenses
- Investing activities, which details cash flow generated from the buying or selling of assets, such as real estate, vehicles, and equipment (using free cash and not debt)
- Financing activities, which details cash flow from both debt and equity financing