Section 3
The Statement of Cash Flows
By Boundless
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A statement of cash flows is a financial statement showing how changes in balance sheet accounts and income affect cash & cash equivalents.
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The cash flow statement has 3 parts: operating, investing, and financing activities. There can also be a disclosure of non-cash activities.
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Cash flows from financing activities arise from the borrowing, repaying, or raising of money.
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Cash flow from investing results from activities related to the purchase or sale of assets or investments made by the company.
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The operating cash flows refers to all cash flows that have to do with the actual operations of the business, such as selling products.
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Having positive and large cash flow is a good sign for any business, though does not by itself mean the business will be successful.
The statement of cash flows is a useful tool in identifying organizational liquidity, but has limitations when it comes to non-cash reporting.