What is a statement of cash flows?

What is a statement of cash flows?

The statement of cash flows is the last statement and focuses on the companies inflow and outflow of cash. The statement of cash flows is made out of three components: cash from operating activities, cash from investing activities, and cash from financing activities. This statement is especially important for companies that are looking to take loans or investments because it demonstrates liquidity along with other important cash-related metrics.


Cash from operating activities is derived from any sources of cash from business activities AKA a company’s products or services. Examples include cash, AR, depreciation, inventory, and AP.


Cash from investing activities comes from cash used in a company's investments. An example of this would be the purchase of a long-term asset or loan. 


Cash from financing activities is derived from cash from investors or banks as well as cash being paid to shareholders. This is generally seen in larger, publicly traded companies that pay out dividends or buy bonds. 

For more information on this topic, check out this article from our friends at Investopedia.