Cash Flow Statement

What is a cash flow statement?

A cash flow statement tracks all the cash entering and leaving your business over a period of time. Unlike the profit and loss statement (which can include non-cash items), the cash flow statement shows actual money movement. It answers a critical question: Where did the cash come from and where did it go?

This is one of the three essential financial statements for any business.

Cash flow statement sections

Cash flow statements typically divide activity into three categories:

• Operating activities — Cash from normal business operations: customer payments, supplier payments, wages, rent
• Investing activities — Cash spent on or received from long-term assets: equipment purchases, vehicle sales
• Financing activities — Cash from loans, owner investments, or loan repayments

Reading the cash flow statement

A healthy business typically shows positive cash flow from operations—your core business generates more cash than it consumes. Negative operating cash flow is a warning sign, even if other reports look good.