Cash flow statement

A financial statement that reports cash and cash-equivalent inflows and outflows over a period, classified as operating, investing, or financing activities.

Operating activities: Cash flows arising from an entity’s principal revenue-producing activities and other activities not classified as investing or financing. This section shows cash generated or used by the entity’s core operations.
Indirect method: A method of presenting operating cash flow that adjusts net income for noncash items and changes in operating assets and liabilities. It explains the common reconciliation from accrual-based profit to operating cash.
Liquidity: The ability of an entity to meet financial obligations as they fall due. Cash balances and operating flows help assess near-term payment capacity.
Income statement: A financial statement reporting revenues, expenses, and profit or loss over a period. It reports accrual-based performance, while the cash flow statement tracks cash movement.
Generally Accepted Accounting Principles (United States): The body of accounting standards and authoritative guidance used by entities reporting under US accounting rules. US GAAP prescribes cash flow classifications and presentation requirements for many US entities.
Investing activities: Cash flows from acquiring and disposing of long-term assets and investments not treated as cash equivalents. This section captures spending on assets and proceeds from their sale.
Direct method: A method of presenting operating cash flow by listing major classes of cash receipts and cash payments. It shows operating cash received and paid without starting from net income.
Cash conversion cycle: The time a business takes to turn investment in inventory and other operating inputs into cash from customers. Operating cash flows reflect how sales, inventory, and supplier payments convert into cash.
Balance sheet: A financial statement showing an entity’s assets, liabilities, and equity at a specific date. It presents a point-in-time position rather than cash flows across a period.
International Financial Reporting Standards: Accounting standards issued by the International Accounting Standards Board for use in jurisdictions around the world. IFRS provides an alternative framework for preparing and classifying cash flow statements.

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