The statement of cash flows

The official name for the cash flow statement is the statement of cash flows. The statement of cash flows is one of the main financial statements. (The other financial statements are the balance sheet, income statement, and statement of stockholders’ equity.)

The cash flow statement reports the cash generated and used during the time interval specified in its heading. The period of time that the statement covers is chosen by the company. For example, the heading may state “For the Three Months Ended December 31, 2005” or “The Financial Year Ended September 30, 2005”.

The cash flow statement organizes and reports the cash generated and used in the following categories:

  • Operating activities – converts the items reported on the income statement from the accrual basis of accounting to cash.

  • Investing activities – reports the purchase and sale of long-term investments and property, plant and equipment.

  • Financing activities –reports the issuance and repurchase of the company’s own bonds and stock and the payment of dividends.

  • Supplemental information–reports the exchange of significant items that did not involve cash and reports the amount of income taxes paid and interest paid.