Cash Flow Statement
A cash flow statement tracks the actual movement of cash in and out of your business over a period of time. Unlike the P&L, which records revenue when it is earned and expenses when they are incurred, the cash flow statement only counts money when it actually changes hands.
Types
Operating Activities
Cash from your core business, including collecting from customers, paying suppliers, and covering payroll.
Investing Activities
Cash used for or received from long-term investments such as buying equipment or selling assets.
Financing Activities
Cash from or repaid to lenders and investors, including loan proceeds, repayments, and owner contributions.
Why it matters
The cash flow statement answers the question your P&L cannot answer: where did the cash actually go? A business can show strong net income on the P&L while simultaneously running out of cash. This happens because revenue was recognized before it was collected, or because capital expenditures were not fully expensed.
Real-world example
A professional services firm shows $40,000 in net income for the quarter. But their cash flow statement shows only $12,000 in operating cash flow because $28,000 in invoices are still outstanding. The P&L looks great but the cash flow statement reveals the real risk.
Ask FREM about your data
Ask FREM: "Show me my cash flow statement for this quarter" to get a plain-English breakdown of where your cash actually went and where it came from.
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