Cash flow statement

Definition

The statement that reconciles reported profit to the cash a business actually took in and paid out over a period, separating operations from investing and financing.

Why It Matters

It answers the question that unsettles every first-time buyer, which is why a profitable business can be short of money. Profit is an accounting result and cash is a fact, and the gap between them is inventory bought, receivables not yet collected, and debt repaid. A buyer servicing a loan is paid out of the cash, not the profit, so this is the statement that says whether the deal survives its own debt.