Statement of cash flows (cash flow statement)
A statement of cash flows shows how money, including cash equivalents, moved through a business during a period. BDC notes it is sometimes called a statement of changes in financial position, and lists financing partners among those who may require financial statements.
BDC lists the cash flow statement as one of four main financial statements, with the balance sheet, the income statement and the statement of retained earnings. The income statement reports profit; the cash flow statement reports cash. BDC says even profitable businesses can have short periods of negative cash flow, so a period’s profit and its cash flow can point in different directions. See what cash flow means when buying a business.
What to check or ask
- Whether the statement covers the same period as the income statement and balance sheet you were given.
- How the cash movements compare with reported profit, and what explanation the seller gives for any gap.
- Whether your lender wants the statement, and in what form.
- Whether the books are kept on a cash or accrual basis; see accrual vs cash accounting.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat are financial statements?
- 02Business Development Bank of CanadaGovernmentWhat is Cash Flow
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