# Cash flow statement

The statement tying reported profit to the cash actually collected.

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.

In numbers: A shop shows $600k of profit and a falling bank balance; the cash flow statement shows why, with $270k gone into receivables and inventory, which is the [working-capital](https://searchspheresource.com/glossary/working-capital) story the P&L cannot tell.

Source: https://searchspheresource.com/glossary/cash-flow-statement
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