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A financial statement that shows the inflows and outflows of cash and cash equivalents over a period, divided into operating, investing, and financing activities.
The cash flow statement is often considered the most important financial statement because it is harder to manipulate than earnings. Operating cash flow shows cash generated from the core business. Investing cash flow covers purchases and sales of long-term assets. Financing cash flow includes debt and equity transactions. Free cash flow (operating cash flow minus capital expenditures) is a key metric for valuation. A company can report profits on its income statement while still running out of cash, making the cash flow statement essential for assessing true financial health.