The Cash Flow Statement, or Statement of Cash Flows, summarizes where a company's money came from (inflow or cash receipts) and where it went (outflow or cash paid). It is a standard financial statement, along with the balance sheet and income statement. It breaks the cash flow into three categories: Operating, Investing, and Financing activities. See the information below for more details.

Example Cash Flow Statement
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Cash Flow Statement

This free spreadsheet template was designed for the small-business owner, looking for an example of how to format a statement of cash flows. The categories will need to be customized of course to suit your company's needs.

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File Type: .xls
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Required: Microsoft Excel® 2002(XP), 2003, 2007, OpenOffice, or Google Docs

Disclaimer: This spreadsheet and the information on this page is for illustrative and educational purposes only. We do not guarantee the results or the applicability to your financial situation. You should seek the advice of qualified professionals regarding financial decisions.

Cash Flow Statement Essentials

Operating Activities make up the day-to-day business, like selling products, puchasing inventory, paying wages, and paying operating expenses. Perhaps the most important line of the cash flow statement is the Net Cash Flow from Operations. This section of the statement is associated with the Current Assets and Current Liabilities sections of the Balance Sheet, as well as the Revenue and Expenses section of the Income Statement.

Investing Activities include buying and selling assets like property and equipment, lending money to others and collecting the principal, and buying/selling investment securities. This section of the statement is associated with the Long-Term Assets section of the balance sheet.

Financing Activities include borrowing from creditors and repaying loans, issuing and repurchasing stock, and collecting money from owners/invenstors, and payment of cash dividends. This section of the statement is associated with the Long-Term Liabilities and Owners'/Stockholders' Equity from the Balance Sheet.

I'm not going to try to explain how to prepare or analyze the cash flow statement other than to say that if you have the records of all the cash transactions, then the preparation can be done using the simple method of categorizing the receipts and payments into the three categories listed above. The indirect method can be used to create the statement of cash flows from the information in the balance sheet and income statement, but I'll leave that explanation for the textbooks. For more information, see the references below.

References:

- Financial Accounting: Reporting and Analysis by M.A. Diamond, E. K. Slice, and J.D. Slice., 2000.
- Cash Flow Statement at wikipedia.org