A lot of public companies operate on accrual accounting such that their income statements cannot be effectively used in ascertaining their cash positions. However, investors need to know the cash position of any company they want to make investment in so as to ensure that they are investing into the right ground. This is where cash flow statement comes in. Cash flow statement is a quarterly financial report which a public traded company is required to release to the public or to the SEC.
Important Constituents of a Cash Flow Statement
- Aggregate data with respect to all cash inflow received by a company from various sources, operations as well as investments.
- Cash outflow of a business according to the nature and type of activity including financial activities, investment activities and operating activities.
- It helps investors as well as the public to access the actual financial state of a company.