The Cash Flow Statement shows how cash moves in and out of a business over a specific period. It tracks real money, not just profit, giving you a clear view of whether the business has enough cash to pay its bills, grow, and survive.

“The Cash Flow Statement reports cash inflows and outflows from operating, investing, and financing activities.”

In short—it tells you where your money is coming from, and where it’s going.

The Cash Flow Statement is divided into three main sections that reflect different types of cash movements within a business. The first is Operating Activities, which includes cash generated or spent through day-to-day operations, such as receiving payments from customers and paying suppliers, employees, or utility bills. The second is Investing Activities, which involves cash used to buy or sell long-term assets like equipment, property, or investments. Lastly, Financing Activities cover transactions related to raising or repaying funds—this includes borrowing money, repaying loans, and contributions or withdrawals from owners or shareholders, such as capital injections or dividends.

Let’s say your business earns $5,000 from customer payments, which falls under operating activities. Then, you buy equipment for $2,000, recorded under investing activities. Finally, you receive a $3,000 loan from the bank, which is a financing activity. When you add it all up—$5,000 coming in, $2,000 going out, and another $3,000 coming in—you end up with a net cash flow of $6,000. This $6,000 increase in cash appears on your Cash Flow Statement, offering a clear view of your business’s liquidity and financial flexibility.  

✅ The Cash Flow Statement tracks actual cash—not just profit
✅ It’s divided into operating, investing, and financing activities
✅ Strong cash flow is essential for business survival and growth
✅ A business can be profitable and still run out of cash—so tracking cash matters
✅ This statement helps plan ahead and avoid cash shortages