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A statement of cash flow is a financial document used in conjunction with balance sheets and income statements. Companies will use these financial statements to create a complete financial report. The statement of cash flow will be used to demonstrate the cash generated by the company within a certain accounting period. It also shows the cash position of the company at the end of the time period. This information will be used by investors and shareholders to determine the company’s profit margin and risk.
The term “cash” refers to both cash and cash equivalents, or assets that are easily convertible into cash. A cash flow statement allows easy assessment of a business’ liquidity and solvency.
Cash flow comes from several different areas of income. Operating activities such as sales are typically the majority. The cash flow statement should also include income from investments, stocks, bond, dividends, and other activities. This information allows important parties such as investors, shareholders, and employees to see how well the company is performing. This allows them to make informed choices regarding stocks and investments.
A cash flow template will typically break cash inflows and cash outflows into three different categories: Operating, Investing, and Financing.
Typically, a small business owner who needs to create a cash flow statement will look at free templates that are available online or through Microsoft Excel.
A typical Cash Flow Statement Excel Template will include line items for: