FT Guide to Using and Interpreting Company Accounts, 4th Edition

5

The statement of cash flows

Introduction

The success and survival of every organisation depends on its ability to generate and acquire cash. We all understand the importance of cash flow. Companies survive when they have cash, and fail when they don’t. This means that you have to understand a company’s cash flow and you will be interested in a company’s ability to generate cash for itself, and acquire it from other sources. You can clearly see this in the statement of cash flows, called the cash flow statement if the accounts relate to financial years starting before 2009, or are prepared using the UK’s rules.

The statement of cash flows identifies the business’s cash movement in the period. It shows where the cash came from and where ...