A cash flow statement (CFS) summarises the amount of cash and cash equivalents entering and exiting your business over a given period. It shows changes in balance sheet accounts enabling analysis of operating, investing and financial activities of your business. Essentially, a CFS can be used to determine the short term viability of a company, in its ability to meet its expenses. A CFS differs from an income statement in that it excludes non-cash related transactions such as the depreciation of assets, deferred income tax, and write-offs.
Importantly CFS reflect:
- Your business’s liquidity and solvency
- Changes in your business’s assets, liabilities and equity through cash outflows, inflows and cash being held by your business
- Your business's operating performance and predicted future cash flows