Explain the purpose of a cash flow statement and how it reflects the firm’s financial status.

Cash flow statement – ford motor company

The purpose of a cash flow statement is to provide information about a company’s sources and uses of cash over a given period of time. This statement has three major sections, which include operating activities, investment activities, and financial activities. Operating activities are used to reflect the performance of an organization by recording revenue as well as expenditures incurred during normal business operations. Investment activities include all long-term transactions such as the purchase or sale of assets, while financing activities are all activities associated with capital raising such as debt and equity.

These categories can help investors assess the profitability and sustainability of a company by showing where and how money flows on a regular basis. This data can be used to better understand a firm’s financial status so that appropriate decisions can be made about its future prospects.