Cash Flow Statement
What is Cash Flow Statement?
A cash flow statement is a financial statement that provides information about the cash generated and used by a company during a specific period. It shows the inflows and outflows of cash, which helps in evaluating the financial health and liquidity of a business. The cash flow statement is an essential tool for investors, creditors, and other stakeholders to understand how a company manages its cash.
What are the types of Cash Flow Statement?
There are typically three types of cash flow statements: 1. Operating Activities: This section represents the cash flows from the core operations of the business, such as revenue from sales and payments to suppliers and employees. 2. Investing Activities: It includes the cash flows related to investments in assets, like purchasing or selling property, plant, and equipment. 3. Financing Activities: This section shows the cash flows from activities like obtaining loans, issuing stocks, or paying dividends to shareholders.
How to complete Cash Flow Statement?
Completing a cash flow statement involves the following steps: 1. Gather Financial Data: Collect all relevant financial information, such as income statements, balance sheets, and transaction details. 2. Identify Cash Flows: Categorize the cash flows into operating, investing, and financing activities. 3. Calculate Net Cash Flow: Determine the net cash flow by subtracting cash outflows from cash inflows for each activity category. 4. Prepare the Statement: Organize the cash flow information into a formal statement, starting with the opening and closing cash balances.
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