What does the Statement of Cash Flows inform about an organization?

The Statement of Cash Flows is a crucial financial statement that provides detailed information regarding the cash inflows and outflows of an organization over a designated time frame. It emphasizes the actual cash that is generated and spent during the period, making it easier for stakeholders to assess the company's liquidity, cash management, and overall financial health. This statement breaks down cash flows into three main categories: operating activities, investing activities, and financing activities, allowing users to analyze how cash is being used to support operations and growth, as well as how much cash is available for future activities.

While investments made in employee training, sales revenue generated from products, and client satisfaction rates and feedback are all important aspects of an organization’s performance and operations, they do not directly measure cash flow. The Statement of Cash Flows focuses solely on liquid funds, making it an essential tool for understanding short-term viability and cash management—a fundamental aspect of any organization’s financial strategy.