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What is a Cash Flow Statement?

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As a business owner you may receive a variety of reports from your bookkeeper and/or accountant. One of these reports might be the Cash Flow Statement. This statement shows where cash has come from and gone over a specific timeframe.

The main components of the Cash Flow Statement are Operating Activities, Investing Activities, Financing Activities, and Disclosure of Non-Cash Activities as per the Generally Accepted Accounting Principles (GAAP). Operating Activities refers to the sources and uses of cash from your company’s products and services. Investing Activities refers to the sources and uses of cash from your company’s investments. Financing Activities refers to the sources of cash from investors and/or banks and the uses of cash paid to your company’s shareholders. Disclosure of Non-Cash Activities refers to activities your company has taken that does not involve cash but is still relevant to your company’s overall financial health. An example of this is signing a lease-purchase agreement or issuing shares to pay off a debt.

Having a Cash Flow Statement allows you to determine your company’s revenue streams as well as outline where your company spends its cash. It gives an accurate picture for investors to see how financially stable your company is and provides information as to how much cash is available to pay off company debts. Another way to find the information available on the Cash Flow Statement would be to compare two Balance Sheets and Income Statements (or Profit and Loss Statement). Check out our blog posts for more information on Balance Sheets and Income Statements.

An image of Melissa Nuij, an administrator and junior bookkeeper at Ruby Business Solutions, and their dog.
Melissa Nuij
Chief Operations Officer

Ruby Business Solutions
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