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Financial Statements: Cash Flow Statement

Remember: Cash is King! Without liquidity you business will not survive.

A cash flow statement reflects the net cash generated by a business during a specific period. Cash inflows usually arise from one of three activities: financing, operations or investing. Cash outflows result from expenses or investing in non-liquid assets.

Cash flow is crucial to a business’s survival. Having ample cash on hand will ensure that creditors, employees and others can be paid on time. If a business does not have enough cash to support its operations, it is considered to be insolvent and a likely candidate for bankruptcy if the insolvency continues. Companies with ample cash flow are able to invest the cash back into the business to generate more cash and profit.