The cash flow statement reports the cash generated or used in the period covered by the cash flow statement.

It shows the cash coming in and going out of the business.

That net cash flow for the period is then added to any cash the company had at the start of the period.

And the ending cash balance then goes on to the balance sheet.

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 is the financing activities.

If these three are all added up that gets us to the company's net cash flow.

So the operating activity section looks at operating cash flows cash flows from our regular business activities 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 money invested in long-term operating or financial assets.

For instance if the company wanted to buy a factory or if the company had some spare cash and decided to invested in another company those invest in cash outflows would go here.

lastly the financing activities this looks at any financing cash inflows or outflows money raised from or paid to debt and equity investors.

If the company wanted to pay rewards to its shareholders it wanted to pay them a dividend that would be a cash outflow in the financing section. When we add these three sections up. It gives us our net cash flow.

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 good for all 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 balls paid.

All of these have an interest in how cash generative the company is if it's a very cash generative we might feel a bit happier about working for the company or engaging it in some deals or transactions.