Cash flow statement

A cash flow statement shows how the company's cash and cash equivalents have changed during the period, and why. It is divided into three parts: cash flow from operating activities, from investing activities (purchases and sales of fixed assets) and from financing activities (loans, repayments, new share issues and dividends).

The difference from the income statement is that the cash flow statement only counts money that has actually been paid. A company can show a profit but still have a negative cash flow, for example if customers pay late or if stock levels grow.

Larger companies must include the cash flow statement in their annual report. For smaller companies it is voluntary, but it is a valuable management tool, especially together with a cash flow forecast.