• Yaser Khamis

Cash Flow Statement

What are financial statements?

​The 3 main financial statements are:

  1. Balance sheet;

  2. Income statement; and

  3. Cash flow statement.

What is a cash flow statement?

In a previous post, we explained that the income statement shows revenue earned and expenses incurred not cash receipts and disbursements. This is turned over in the cash flow statement which gives a snapshot of Cash Receipts and Disbursements for a Period of Time.

The cash flow statement is divided into 3 sections:

Operating activities

Net cash inflow or outflow resulting from operations. Operations are the core business activities of the company.

Investing activities

Net cash inflow or outflow resulting from investing activities. Includes purchases of additional fixed assets etc.

Financing activities

Net cash inflow or outflow results from financing activities. Financing activities include borrowing funds from a bank, additional capital by the shareholders or dividends paid to shareholders.

The bottom of the cash flow statement shows the bank balance (or cash) at the beginning of the year, the net cash flows of the business for the period of time covered by the cash flow statement and the bank (or cash) balance at the end of the year.