Cash Flow Statement
Reports the cash effects of a company’s operations for a period of time.
Shows cash increases and decreases from operating, investing, and financing
Indicates net increase or decrease in cash balance during the period as well
as ending cash balance.
There are three types of business activity:
Financing activities - to start or expand a business, the owner or owners quite
often need cash from outside sources. Activities include:
Borrowing money from creditors which creates a liability - source of cash
• bank loan
• debt securities (bonds)
Repayment of money borrowed - use of cash
Selling ownership interests in the corporation to shareholders - source of cash
Payment of dividends - use of cash
♦ Investing activities - obtaining resources or assets needed to operate the
business (i.e., equipment, buildings, etc.) and investing idle cash (i.e. short-
term or long-term investments).
Purchasing assets (property, plant and equipment) - use of cash
Selling old assets (property, plant and equipment) - source of cash
Purchasing short or long term investments (bonds or shares of other
corporations) - use of cash
Selling short or long term investments -