Editing Cash flow statement (section)

==Purpose==
{| class="wikitable" style="float:right; margin: 0 0 0 10px"
|-
! colspan="2"|'''Statement of Cash Flow - Simple Example'''<br />''for the period 1 Jan 2006 to 31 Dec 2006''
|-
| Cash flow from operations
| align="right"|$5,000
|-
| Cash flow from investing
| align="right"|($1,000)
|-
| Cash flow from financing
| align="right"|($2,000)
|-
| '''Net cash flow'''
| align="right"|'''$2,000'''
|-
| colspan="2" style="font-size:small;text-align:right" | Parentheses indicate negative values
|}
The cash flow statement shows the sources of a company's cash flow and how it was used over a specific time period.<ref>{{Cite web |last=Bichachi |first=Rebeca |date=December 11, 2023 |title=Restaurant Financial Statements 101 |url=https://www.netsuite.com/portal/resource/articles/accounting/restaurant-financial-statements.shtml |access-date=May 28, 2025}}</ref> It is an important indicator of a company's financial health, because a company can report a profit on its [[income statement]], but at the same time have insufficient cash to operate.<ref>{{cite book |last = Bodie |first = Zane |author2=Alex Kane |author3=Alan J. Marcus |title = Essentials of Investments, 5th ed |publisher = McGraw-Hill Irwin |year = 2004 |pages = 455 |isbn = 0-07-251077-3 }}</ref><ref name="Answers">{{cite web|last=Answers |first=All |url=https://ukdiss.com/litreview/literature-review-on-cash-flow-statements.php?vref=1 |title=Literature Review on Cash Flow Statements |publisher=ukdiss.com |date=November 2018 |accessdate=8 July 2021 |location=Nottingham, UK}}</ref> The cash flow statement reveals the quality of a company's earnings (i.e. how much came from cash flow as opposed to accounting treatment), and the firm's capacity to pay interest and dividends.<ref>{{cite book |last1=Nikbakht, Ehsan and Groppelli, A.A. |title=Finance |date=2012 |publisher=Barron's Educational Series, Inc. |location=Hauppauge, NY |isbn=978-0-7641-4759-3 |edition=Sixth}}</ref>

The cash flow statement differs from the [[balance sheet]] and [[income statement]] in that it excludes non-cash transactions required by [[accrual basis]] accounting, such as depreciation, [[deferred income]] taxes, write-offs on bad debts and sales on credit where receivables have not yet been collected.<ref>{{cite book |last=Epstein |first=Barry J. |author2=Eva K. Jermakowicz |title=Interpretation and Application of International Financial Reporting Standards |publisher=[[John Wiley & Sons]] |year=2007 |pages=91–97 |isbn=978-0-471-79823-1}}</ref>

The cash flow statement is intended to:<ref>{{cite book |last1=Melicher, R. & Welshans, M. |title=Finance: Introduction to Markets, Institutions & Management |date=1988 |publisher=South-Western Publishing |location=Cincinnati OH |isbn=0-538-06160-X |page=150 |edition=1988}}</ref><ref>Epstein, pp.90-91.</ref><ref>{{cite book |title=Melicher & Welshans op cit page 150}}</ref>
# provide information on a firm's [[accounting liquidity|liquidity]], [[solvency]] and financial flexibility (the ability to change [[cash flow]]s in future circumstances)
# help predict future cash flows and borrowing needs
# improve the comparability of different firms' operating performance by eliminating the effects of different [[accounting methods]]. The cash flow statement has been adopted as a standard financial statement because it eliminates allocations, which might be derived from different accounting methods, such as various timeframes for depreciating fixed assets.<ref name="Epstein, p. 91">Epstein, p. 91.</ref>