Cash Flow Statement is also a report card on functioning of the company for some. Cash flow refers to the steady flow of money in and out of an organization, or the amount of cash that a business enterprise earns and holds during the financial period.
Cash Flow doesnt report the profit & loss of the company and is just an indicator on the movement of cash in an organization and helps in maintenance of day-to-day accounts.
Cash Flow can be segmented in to two major fields i.e. Cash Inflow and Cash Outflow. Lets look at them briefly: -
a) Cash Inflow is the money that flows in to the organization in the form of sales, investments, borrowings and advances.
b) Cash outflow refers to all the money that is paid out in form of procurement costs, operation costs, staff salaries and other miscellaneous expenses
Cash generated out of day-to-day Business operations and Investments are included in the Cash Flow Statement. Lets look at these sections closely
While Cash Flow Statement aids in everyday accounting, it also helps in monitoring and controlling cash standing of the organization. However it does not given an indication of overall financial health of the organization.