This article will answer the following questions:

• What is a cash flow statement?
• Why is it important?
• How does it function? What is its structure?

What are the Financial Statements?

The three financial statements are the core of the fundamental analysis. Investors can use the statements to understand the necessary information for making an appropriate investment decision. Business owners can use the financial statements to decide whether or not to adjust strategies in order to perform better in the next season.

What is the Cash Flow Statement?

The cash flow statement is one of these three statements and it demonstrates how much cash flows in and out during a period of time. It is essential because it acts as a linkage between the three statements and integrates the process of analyzing a company’s financial condition.

The cash flow statement contains three categories:

1. Cash Flow From Operations
2. Cash Flow From Investing
3. Cash Flow From Financing

Specifically:

Operating activities record the cash generated from the company's core goods and services.

Investing activities contain the cash from purchasing and selling assets.

Financing activities include cash from debt and equities.

To learn more on how to analyze a cash flow statement through excel, read the article: Excel: Cashflow Statement Analysis.

The details of items under the cash flow statement will be explained in other articles.