Introduction

The Third Financial Statement

So far, the financial statements you have studied have been the Position Statement (the Balance Sheet, showing a company's financial position on a particular date) and the Income Statement (the Statement of Profit and Loss, showing operating results over a period). There is a third, equally important financial statement: the Cash Flow Statement, which shows the inflows and outflows of cash and cash equivalents.

The Cash Flow Statement gives users of financial information a tool to understand the sources and uses of cash over a period, across the different activities of a company. It has grown substantially in importance in recent years because of its practical usefulness to investors, creditors, and management.