Cash Flow Statement is one of the important financials statement along with Balance Sheet and Profit and Loss Account.
It basically shows all inflows and outflow of the cash and bank balances in particular period.
It basically have 3 components :
1) Cash Flows from Operating Activities
2) Cash Flows from Investing Activities
3) Cash Flows from Financing Activities.
Cash Flow From Operating Activities:
This part of Cash Flow Statement basically shows cash generated from its regular business operations. Ideally this should be positive to have good financial position of the company. Important components are basically Profit , depreciation, tax provision, increase or decrease in current assets like debtors, stock etc., increase or decrease in current liabilities like creditors, trade payables etc.
Cash Flow From Investing Activities:
This part of Cash Flow Statement basically shows cash generated from investing activities like Sale or Purchase of Fixed Assets, Investments etc.
Cash Flow From Financing Activities:
This part of Cash Flow Statement basically shows cash generated from financing activities like Proceeds or Repayment of Long or Short Term Borrowing , interest paid etc.
Thus Cash Flow Statement shows how well business uses its cash and how healthy are its operations, how much Company depend on borrowings and what are various investments made by the business.
Cash Flow Statement end balance always matches with Cash and Bank balance amount appearing in the balance sheet.
