Cash Flow Statement
Also called: statement of cash flows
What is Cash Flow Statement?
A cash flow statement tracks actual cash movement over a period, split into operating, investing and financing activities. It explains the gap between reported profit and the change in the bank balance.
Why Cash Flow Statement matters
Profitable businesses fail from cash, not from losses. This statement is what shows that profit was consumed by stock, receivables or loan repayments rather than reaching the bank.
Cash Flow Statement formula
Operating cash flow = Net profit + Non-cash expenses − Increase in working capital
Investing and financing flows are listed separately.
How Cash Flow Statement works in practice
Start with net profit, adjust for non-cash items such as depreciation, then for movements in stock, receivables and payables. The operating section is the one that matters most for a small business.
Frequently asked questions
Usually stock build-up, unpaid customer invoices, loan principal repayments or owner drawings — none of which appear as expenses.