Definition
A cash flow statement is a financial statement that shows how cash comes in and goes out of a business over a period of time. It helps in understanding how a company manages its cash for operating, investing, and financing activities.
Example
For example, a company may show cash received from sales (100,000), cash spent on expenses (60,000), and cash used to buy equipment (20,000) in its cash flow statement. This helps investors understand how money is being used.
Caution
A cash flow statement shows only cash movements and not overall profit. A company may have good cash flow but still face financial issues, so it should be analyzed along with other financial statements.