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A firm’s cash flow statement measures the sources and uses of its cash over a certain period of time. The income statement shows how it is financially performing over a specific timeframe.

The cash flow statement essentially reveals whether the firm can pay its bills. It shows how it receives and spends its money, usually over a one-month period. It captures increases or decreases in accounts receivable or payable. It does not include depreciation and amortization.

The most common financial statement is the income statement, which lists revenue, total expenses – including depreciation – and profit or loss, usually over a month, as well. Specifically, how much revenue did the firm bring in? How much did it pay in expenses? Did a profit or a loss result?

The net profit or net burn on the income statement can be used to calculate cash flow from operations, thus linking the two financial statements.

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