Guiding Questions
In this blog, we’ll explore cash flow statements and why they are important. Many people hear the term but don’t fully understand what it measures. Common questions include:
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What is a cash flow statement?
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Why is cash flow important for a business?
What Is A Cash Flow Statement?
A cash flow statement is a financial statement that shows how cash moves in and out of a business over a period of time.
Main Sections
A cash flow statement has three main parts.
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Operating Activities: Cash generated from daily business operations, such as sales and expenses
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Investing Activities: Cash used for or earned from buying and selling assets, like equipment or investments
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Financing Activities: Cash from loans, investments, or money paid back to owners
Why It Matters
Cash flow statements help determine whether a business can pay its bills and continue operating. A company can appear profitable but still struggle if it doesn’t have enough cash on hand.
Review
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What does a cash flow statement show? Movement of cash
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What are operating activities? Daily business cash transactions
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Why is positive cash flow important? It keeps the business running
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