September 22, 2012
Motley Fool analyst Anand Chokkavelu answers the question: What is the statement of cash flows?
As he explains it, the statement of cash flow is one of the financial statements companies provide to investors, and it one that's valuable in conjunction with the income statement, because you can compare GAAP earnings with true cash movement, which can oftentimes differ wildly.
The statement of cash flows also provides insight into dividend issuing, capital expenditures, and share repurchases. In short, it can reveal a lot about a company. For example, Amazon.com appears very unprofitable on paper, recording minuscule net income each quarter, but a glimpse at the statement of cash flows reveals that all of its money is being piled into capital expenditures, and the company is reinvesting in itself for future growth.
Remember never to analyze one financial statement in isolation, and always to read them in context to each other.
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