Cash Flow Statement

In accounting, cash flow is a company’s difference in the amount of cash available at the beginning of a period and the amount at the end of the same period.

The cash flow is positive if the closing balance is higher than the opening balance, otherwise is negative.

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The cash flow statement is one of the most revealing documents of a company’s financial statements.

It shows the sources and uses of a firm’s cash as it moves both in and out.

When analyzing a company's cash flow statement, it is important to consider each of the various sections that contribute to the overall change in cash position.

In many cases, a company may have negative overall cash flow for a given period, but if the company can generate positive cash flow from its business operations, the negative overall cash flow is not necessarily a bad thing.

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Cash flow is increased by selling more goods or services, selling an asset, reducing costs, increasing the selling price, collecting faster, paying slower, bringing in more equity, or taking a loan.

The level of cash flow is not necessarily a good measure of performance, and vice versa.

High levels of cash flow do not compulsorily mean high or even any profit; and high levels of profit do not automatically translate into high or even positive cash flow.

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