Statement Of Cash Flows Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Statement Of Cash Flows, written in plain English, along with examples of how it is used.

What is Statement Of Cash Flows?

Financial statement that indicates the cash that flows into and out of a business.

History and Meaning of Statement Of Cash Flows

A Statement Of Cash Flows is a vital part of a business's financial statements. It provides a summary of the company's cash inflows and outflows over a specified period, helping analysts and investors understand how the business generates cash from its operations, investment activities, and financing activities.

The Statement Of Cash Flows was introduced by the Financial Accounting Standards Board (FASB) in 1987, and it quickly became a standard financial statement that businesses must prepare alongside the balance sheet and income statement. The statement is based on the premise that cash flow is one of the best indicators of financial health, and it provides valuable information about a company's liquidity, solvency, and overall financial performance. It also helps businesses manage their cash more effectively by providing insights into their cash inflows and outflows.

Examples of Statement Of Cash Flows

  1. XYZ Corporation's Statement Of Cash Flows shows a net increase in cash of $50,000 due to increased sales and improved cash collection processes.

  2. The Statement Of Cash Flows for the quarter shows that ABC Corporation generated $100,000 in cash flows from financing activities by issuing new shares of common stock.

  3. The Statement Of Cash Flows for the year ending December 31, 2020, indicates that DEF Corporation generated $500,000 in cash flows from operating activities and used $200,000 in cash flows from investing activities.

Legal Terms Similar to Statement Of Cash Flows

  1. Balance Sheet - A statement that shows the financial position of a company at a given point in time by listing its assets, liabilities, and equity.

  2. Income Statement - A statement that summarizes a company's revenues and expenses over a period, showing its profit or loss.

  3. Cash Flow Forecast - An estimate of future cash inflows and outflows based on a company's expected revenues and expenses.