What Is A Cash Flow Statement (CFS)?
The statement of cash flows or the cash flow statement, as it's commonly referred to, is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.
The cash flow statement (CFS) measures how well a company manages its cash position, meaning how well the company generates cash to pay it's debt obligations and fund it's operating expenses. The cash flow statement complements the balance sheet and income statement and is a mandatory part of a company's financial reports since 1987.
In this article, we'll show you how the CFS is structured, and how you can use it when analyzing a company. (Also check out our tutorial, An Introduction To Fundamental Analysis.)
The Structure of The CFS
The main components of the cash flow statement are:
- Cash from operating activities,
- Cash from investing activities,
- Cash from financing activities,
- A fourth category, disclosure of noncash activities, is sometimes included when prepared under the generally accepted accounting principles, or GAAP.
It's important to note that the CFS is distinct from the income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit. Therefore, cash is not the same as net income, which on the income statement and balance sheet, includes cash sales and sales made on credit. (For background reading, see Analyze Cash Flow The Easy Way.)
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