What does a cash flow statement provide?

A cash flow statement provides a comprehensive overview of cash inflows and outflows over a specific period, which is critical for assessing the liquidity and financial health of a business. This statement outlines where cash is generated from, such as operating activities, investing activities, and financing activities, as well as where cash is spent, making it easier for stakeholders to evaluate how well the company generates cash to cover its liabilities and fund its operations.

By focusing on cash rather than income or expenses, the cash flow statement offers a more immediate reflection of a company's ability to meet its obligations and invest in future growth. This financial statement is particularly useful for management, investors, and creditors, as it highlights the actual cash position rather than accounting profits, which may include non-cash items. Such clarity allows users to understand how effectively a company is managing its cash resources over the designated period.