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Cash Flow Statement: Definition and Meaning
Definition
A cash flow statement is a financial statement showing cash provided or used by operating, investing, and financing activities during a reporting period.
Why It Matters
The cash flow statement helps users understand how the cash balance changed from one period to another. It separates cash generated by normal operations from cash used for investments, equipment purchases, debt payments, owner distributions, or financing activity.
Reviewing cash flow alongside the balance sheet and income statement can help management understand why profit and cash may differ.
Example
A statement of cash flows may show cash collected from customers, cash used to purchase equipment, and cash received from a bank loan.
Related Terms
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