Statement of Cash Flows
Definition
The Statement of Cash Flows shows how cash changed during a period, organized into operating, investing, and financing activities. It explains why profit and cash are different.
Example
A business reports $3,000 in profit but cash only increased by $1,000. The Statement of Cash Flows shows that $2,000 went to equipment and loan payments.
Why It Matters
The P&L shows profit, but the Statement of Cash Flows shows where the cash went. It answers the question: 'If we made profit, where is the money?'