Cash flow
The cash flow statement is the third and final major financial statement (after the profit and loss account and the balance sheet). It is necessary because profit and loss accounts bear only a passing relationship to the money that actually changes hands. The cash flow statement focuses on, need I say, changes in liquidity – and incidentally reveals a lot more than just what is happening to the bank balance. Recall that the profit and loss account reveals profits. Take these two financial statements together and you have a remarkably good picture of profitability and liquidity. These are the prerequisites for overall success. In the long term it is not possible to run a business unless you have both.
This chapter describes the cash ...
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