The Cash Flow Statement is one of the top financial reports used by business owners, along with the Balance Sheet and Income Statement reports. There are two types of reporting methods for the Cash Flow Statement: a direct method and an indirect method. WorkingPoint uses the indirect method.
Your Cash Flow Statement helps you analyze the affects of your Balance Sheet and Income Statement activity on your cash and breaking your spending out into 3 main categories: Operations, Financing, and Investing. Since your Balance Sheet and Income Statement are accrual-basis reports, you don't actually see how your cash is being affected by your activities because these reports include all transactions. The Cash Flow Statement takes the Balance Sheet and Income Statement and converts them into a single cash-basis report so you can see how you cash is being used.
Use the Cash Flow Statement report to:
See where your cash is going and coming from
Compare Net Income to Net Cash from Operating Expenses to measure quality of earnings
Provide creditors with necessary financial reports
Show investors how your cash is being used