Term · Cash Flow
Cash-flow statement
Also called: statement of cash flows, cash flow statement“If the business was profitable, why did the bank balance still go down?”
A financial statement that explains how cash changed through operating, investing, and financing activity. Each guide connects the definition to a finance workflow and the source records you should verify.
See the numbers in context
The sample is illustrative. Use the same structure with your own reporting period and source records.
What it tells you
A cash-flow statement explains the movement between beginning cash and ending cash. It groups cash activity into operating, investing, and financing sections.
The statement helps reconcile an important difference: a business can report profit while cash declines, or report a loss while cash increases.
The three sections
- Operating activities relate to the core business and changes in working-capital accounts.
- Investing activities include purchases or sales of long-term assets and investments.
- Financing activities include borrowing, debt repayment, owner contributions, distributions, and similar funding activity.
When it is useful
Use it to explain changes in liquidity, evaluate whether operations generate cash, and separate normal business activity from borrowing or asset purchases.
What to verify first
Confirm that beginning cash plus net cash movement agrees with ending cash. Then compare ending cash with the relevant cash accounts and investigate material differences.
Common mistake
Do not substitute a profit-and-loss statement for cash-flow analysis. Noncash expenses, payment timing, customer collections, vendor payments, borrowing, and asset purchases can all separate cash movement from reported profit.
“Review the cash-flow statement for this period. Separate operating, investing, and financing cash flows, identify the largest drivers of the change in cash, and reconcile beginning cash to ending cash. Cite the source lines and distinguish cash movement from accounting profit.”
Further reading
Last reviewed August 13, 2026
Educational information only. Review source records and apply your organization's accounting policies and professional judgment before acting.