Cash Flow Statement Template

Download a Statement of Cash Flows template for Microsoft Excel®

The Cash Flow Statement, or Statement of Cash Flows, summarizes a

company's inflow and outflow of cash, meaning where a business's money
came from (cash receipts) and where it went (cash paid). By "cash" we mean
both physical currency and money in a checking account. The cash flow
statement is a standard financial statement used along with the balance
sheet and income statement. The statement usually breaks down the cash
flow into three categories
including Operating, Investing and Financing activities. A simplified and less
formal statement might only show cash in and cash out along with the
beginning and ending cash for each period.

To perform a cash flow analysis, you can compare the cash flow statement
over multiple months or years. You can also use the cash flow analysis to
prepare an estimate or plan for future cash flows (i.e. a cash flow budget). This
is important because cash flow is about timing - making sure you have money
on hand when you need it to pay expenses, buy inventory and other assets,
and pay your employees.

A cash flow analysis is not the same as the business budget or profit and loss
projection which are based on the Income Statement. However, for a small
uncomplicated business operating mainly with cash instead of credit accounts,
there may seem to be little difference.

Cash Flow Statement Essentials

Operating Activities

Operating activities make up the day-to-day business, like selling products,

purchasing 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

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

Financing activities include borrowing from creditors and repaying loans,

issuing and repurchasing stock, and collecting money from owners/investors,
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.