Why is cash flow statement important?

[Lily]

Hey everyone, I’m trying to understand why the cash flow statement matters so much in financial analysis. I know it tracks money moving in and out, but how does it actually help businesses or investors? If anyone can explain it in simple terms, I’d appreciate the insights.
You can also read what is a cash flow statement.

 

[inshya]

The cash flow statement is a critical financial document because it provides insights into a company's liquidity, solvency, and overall cash-generating ability, which cannot be fully understood from the income statement and balance sheet alone.

 

[rajivkumar]

A cash flow statement is important because it shows how money actually moves in and out of a business. Unlike profit, which can include non-cash items, cash flow reveals whether a company can pay its bills, buy inventory, invest, and survive day-to-day operations. It helps owners understand liquidity, plan for future expenses, avoid cash shortages, and make better financial decisions. Investors and lenders also rely on it to judge a company’s financial health and stability.

 

[kebido]

A cash flow statement is important because it shows how money actually moves in and out of a business. Even if a company looks profitable on paper, it can still run into trouble if it doesn’t have enough cash on hand.

 

[Shane Warne]

The cash flow statement is to indicate the actual movement of cash in and out of business as a consequence of the business operation, investment and financing. It is important since solely profits do not inform you whether the company is making real cash, whether it is paying bills and liquidity problem. Without it, you may end up not seeing when there are hidden issues with good earnings.

 

[Sophie]

A statement of cash flow is significant as it is used to indicate the flow of money in and out of a business. It will aid in evaluating the liquidity, financial health, payment capacities, and general stability and performance.

 

[Lucas]

A cash flow statement is important because it shows how much cash is coming in and going out of a business. It helps you understand whether a company can pay its bills, invest, and run daily operations smoothly. It also reveals real liquidity, which profits alone can’t show.