The cash flow statement tracks the cash entering and leaving a company during a specific period, such as a quarter or fiscal year. It divides those movements into operating, investing, and financing activities (simple labels that still require context). The net change across the three sections reconciles the company’s beginning cash balance with its ending cash balance.
This statement matters because net income is not the same as cash flow. The income statement follows accrual accounting, which generally recognizes revenue when earned and expenses when incurred, even if cash has not yet changed hands. A company can therefore report a profit while consuming cash, or report a loss while generating cash.