Statement of Cash Flow
Cash Flow statement or the Statement of cash flow is on of the four annual financial statements published by a company. This statement shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). "Cash and cash equivalents" cash and cash equivalents, and categorizes according to operating, investing, and financing activities. These three categories show how cash changes from the beginning balance to the ending balance in cash the balance sheet. Cash-flow statement is an important indicator of company’s financial health, and is of an important interest to Wall Street. Positive cash flows permit a company to take advantage of market opportunities, pay dividends to owners, expand its operations, and replace needed assets.
Purpose Cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near maturity there is little risk that their value will change if interest rates change. The statement of cash flows helps determining the ability to pay to the creditors/vendors, and also is useful in determining the viability and solvency of a company in turn.
The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in time, and the income statement summarizes a firm's financial transactions over an interval of time. These two financial statements reflect the accrual basis accounting used by firms to match revenues with the expenses associated with generating those revenues. The cash flow statement includes only inflows and outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash receipts and payments. These noncash transactions include depreciation and write-offs on bad debts. The cash flow statement is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities. Noncash...