What is included in the statement of cash flows?

The statement of cash flows provides a detailed analysis of cash inflows and outflows from three main types of activities: operating, investing, and financing. This comprehensive view allows stakeholders to understand how cash is generated and used within the organization over a specific period.

Operating activities encompass the cash effects of transactions that enter into the determination of net income, such as cash receipts from sales and cash payments for expenses. Investing activities reflect cash transactions for the purchase and sale of physical and financial investments. Financing activities include cash flows related to borrowing, repaying debt, and transactions involving equity.

By including all these components, the statement of cash flows presents a complete picture of an entity's cash position, which is essential for assessing its liquidity, solvency, and overall financial health. This holistic approach distinguishes the statement of cash flows as a crucial financial statement in assessing how a company manages its cash resources.