Cashflow Statement

What they are, why they're important, how to read one

Table of Contents

What is a Cashflow Statement

Why are Cashflow Statements Important

How to Read a Cashflow Statement

What is a Cashflow Statement?

A cashflow statement is one of the most important financial documents for a startup. It is a record of the cash that flows in and out of the business over a period of time. The statement can be used to track the company's overall financial health and to make informed decisions about how to allocate resources.

Why Cashflow Statements are Important

Cashflow statements are important because they provide insights into the company's overall financial health. The statement can be used to track progress towards goals, to identify trends, and to make informed decisions about how to allocate resources.

A cashflow statement can also be used to assess the company's ability to meet short-term and long-term obligations. This information is critical for founders who are seeking outside funding or looking to secure a line of credit.

How to Read a Cashflow Statement

A cash flow statement has three sections: operating activities, investing activities, and financing activities. Each section shows the different types of cash inflows and outflows over a period of time.

Operating Activities

This section includes all of the cash inflows and outflows from the company's day-to-day operations. This includes revenue from sales, as well as expenses like rent and payroll.

Investing Activities

This section includes all of the cash inflows and outflows from the company's investments. This can include things like purchasing new equipment or selling investments.

Financing Activities

This section includes all of the cash inflows and outflows from the company's financing activities. This can include things like issuing new equity or borrowing money from lenders.

The Bottom Line

A cash flow statement is an important financial document that provides insights into how a company manages its cash. The statement shows the cash inflows and outflows over a period of time, typically a month or quarter. This information is important for startups because it can help them make informed decisions about where to allocate their resources.

Financial modeling made easy

Looking to build a financial model for your startup? Build investor-ready models without Excel or experience in Finance.

close
By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.