Cash flow statement

A cash flow statement is a financial report that shows incoming and outgoing money during a particular period (often monthly or quarterly). It does not include non-cash items such as depreciation. This makes it useful for determining the short-term viability of a company, particularly its ability to pay bills.

People and groups interested in cash flow statements include:

• Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses
• Potential lenders /creditors, who want a clear picture of a company's ability to repay
• Potential investors who need to judge whether the company is financially sound
• Potential employees or contractors who need to know whether the company will be able to afford compensation

Cash flow statements are particularly important for start-up companies with limited liquid assets. These companies are vulnerable to devastating cash shortages, even when Accounts Receivable balances point to long-term financial health.

Statement of Cash Flows

 Statement of Cash Flow for the period 1/1/xx to 1/1/xx+1
 Cash flow from operations (CFO)      +/-  x x
 Cash flow from investing (CFI)       +/-  y y
 Cash flow from financing (CFF)       +/-  z z
 Equals change in cash account      = change of cash balance
 + Beginning of period cash         + Beginning cash
 = Ending cash balance              = Ending cash

Operating activites

• Net income from income statement
• Depreciation
• Non-cash items
• Deferred tax
• Interest amortization
• Accrual items, such as wages payable

Investing activities

• Capital expenditures
• Investments

Financing activities

• Dividends paid
• Sale purchase of stock
• Net borrowings

Preparation methods

1. Direct Method
2. Indirect Method

Examples

Citigroup Incorporated cash flow: ([1]) ([2])

See also

• Financial statements
• Free cash flow