The basic guide to a statement of cash flows

Want to really understand your cash flow? This is the report that will tell you where and how. The statement of cash flows provides information on your business’s sources and uses of cash and, like the income statement, covers a period of time (i.e., for the year ended December 31, 2015).  This is an important financial report since good cash flow management is important for the growth and success of your business.

statement of cash flows

Want a deeper understanding of what your statement of cash flows is showing?

Compare the cash from operating activities to your net income. If the cash from operating activities is consistently greater than net income, your net income is said to be of a “high quality”. If the cash from operating activities is less than net income, it’s time to figure out why the reported net income is not turning into cash.

Understanding what your cash flow statement is telling you about your business is important.  Cash flow management is crucial for the success of your business so spend some time reviewing this financial report – it has a lot of interesting and useful information.  It’s not enough to assume that if your business is profitable, you’re okay.

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