The cash flow statements reports the cash generated or used in the period covered by the cash flow statements. That cash generated is then added to any cash the company had at the start of the period, and then that goes onto the balance sheet. So our cash flow statements, and balance sheets, and our income statements are all linked together. The cash flow statement is split into three sections. The first of these is the operating activities, the second is the investing activities, and the third are the financing activities. If these three are all added up, that gets us to the company's net cash flow.

So the operating activities section looks at operating cash flows in or out of the company. If we were looking at a manufacturing company that sold cars, any cash sales of cars would go in here.

In the investing activities, we look at any investing cash inflows or outflows. For instance, if the company wanted to buy a factory or if the company had some spare cash and decided to invest it in another company, those investing cash outflows would go here.

Lastly, the financing activities. This looks at any financing cash in or outflows. If the company wanted to pay a reward to its shareholders, it wanted to pay them a dividend, that would be a cash outflow in the financing section.

So why is cash so important? Well, some people say that cash is king and an organization can't run without cash. Cash is used to pay bills. It acts as a reward to investors. We've already mentioned the dividends paid to shareholders. It pays salaries and many more items as well. Also, cash in being greater than cash out is also good for all of our stakeholders. The various stakeholders can include shareholders who receive a reward, lenders who might receive interest, employees who get paid by the company, and suppliers who get their bills paid. All of these have an interest in how cash generative the company is. If it's very cash generative, we might feel a bit happier about working for the company or engaging it in some deals or transactions.