Cash Flow Statement
Definition
The financial statement that shows where cash came from and where it went over a period, split into operating, investing and financing activities.
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Formula
Net Change in Cash = Operating Cash Flow + Investing Cash Flow + Financing Cash FlowThis is the statement that answers the most common owner question: "We were profitable, so where is the money?" For inventory businesses, the answer is usually inventory, receivables or loan payments.
Read it alongside the P&L every month. Watch for: profit growing while operating cash flow shrinks, which means growth is eating cash faster than it produces it.
Example
You earned $90,000 of net income but cash fell $20,000, because inventory grew $85,000 and you paid down $25,000 of loans.