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Statement of Cash Flows: Definition and Meaning
Definition
A statement of cash flows is another name for a cash flow statement. It shows operating, investing, and financing cash activity during a reporting period.
Why It Matters
The statement helps explain why the cash balance changed between two balance-sheet dates. It can reveal whether cash is being generated from operations, borrowed, invested in assets, or distributed to owners.
This information is helpful when evaluating liquidity, debt capacity, capital spending, owner distributions, and the relationship between reported profit and cash generation.
Example
The statement separates cash collected from customers from cash used to purchase equipment and cash received from debt financing.
Related Terms
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