Cash Flow Statement

AAA

DEFINITION of 'Cash Flow Statement'

One of the quarterly financial reports any publicly traded company is required to disclose to the SEC and the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.

INVESTOPEDIA EXPLAINS 'Cash Flow Statement'

Because public companies tend to use accrual accounting, the income statements they release each quarter may not necessarily reflect changes in their cash positions. For example, if a company lands a major contract, this contract would be recognized as revenue (and therefore income), but the company may not yet actually receive the cash from the contract until a later date. While the company may be earning a profit in the eyes of accountants (and paying income taxes on it), the company may, during the quarter, actually end up with less cash than when it started the quarter. Even profitable companies can fail to adequately manage their cash flow, which is why the cash flow statement is important: it helps investors see if a company is having trouble with cash.

To learn more about the cash flow statement, check out How do changes in working capital affect a company's cash flow?

VIDEO

Loading the player...
RELATED TERMS
  1. Cash Accounting

    An accounting method where receipts are recorded during the period ...
  2. Fixed Charge

    Any type of fixed expense that recurs on a regular basis. Fixed ...
  3. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  4. Accrual Accounting

    An accounting method that measures the performance and position ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Income Statement

    A financial statement that measures a company's financial performance ...
RELATED FAQS
  1. What is the most important "C" in the Five Cs of Credit?

    Financial institutions attempt to mitigate the risk of lending to unworthy borrowers by performing a credit analysis on individuals ... Read Full Answer >>
  2. What is the purpose of drawing up a cash flow statement?

    The purpose of drawing up a cash flow statement is to see a company's sources of cash and uses of cash, over a specified ... Read Full Answer >>
  3. What sorts of factors decrease cash flow from operating activities?

    The operations section of the cash flow statement reconciles net income and cash flows by adding back noncash expenses and ... Read Full Answer >>
  4. What sorts of factors increase cash flow from operating activities?

    Cash flow from operating activities is calculated by adding net income, total non-cash expenses and net change in working ... Read Full Answer >>
  5. What is the difference between a balance sheet and a cash flow statement?

    A balance sheet, or statement of financial position, is a summary of the financial balances of a company, while a cash flow ... Read Full Answer >>
  6. What are analysts looking for when they use free cash flow to equity (FCFE)?

    Analysts use free cash flow to equity (FCFE) to determine whether a company has enough cash available to pay its shareholders ... Read Full Answer >>
  7. What are some examples of cash flow from operating activities?

    Cash flows from operating activities is a section of the cash flow statement that explains the sources and uses of cash from ... Read Full Answer >>
  8. What is the difference between cash flow and fund flow?

    In financial accounting, "cash flow" refers to the statement of cash flows, a required report under generally accepted accounting ... Read Full Answer >>
  9. What is the difference between a compiled and a certified financial statement?

    All publicly-traded companies are required to provide financial statements, including a balance sheet, cash flow statement ... Read Full Answer >>
  10. Is it possible for a company to have a positive cash flow and a negative net income?

    This situation may seem a bit counter-intuitive at first, but it is actually quite common and not too difficult to understand. ... Read Full Answer >>
Related Articles
  1. Investing Basics

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  2. Markets

    How To Efficiently Read An Annual Report

    Learn how to read between the lines and decipher the actual condition of a company.
  3. Fundamental Analysis

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  4. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  5. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  6. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  7. Retirement

    Navigating Government And Nonprofit Financial Statements

    Learn how to trace where your tax dollars and charitable donations are going.
  8. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  9. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  10. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center