A cash flow statement, balance sheet and income statement, is the primary measure of a company’s financial position. It tracks the inflow and outflow of cash during a given time period. The term “cash” refers to both cash and cash equivalents, which are assets readily convertible to cash. The financial statement provides relevant information for assessing a business’ liquidity, quality of earnings and solvency.

Understanding a company’s cash flow is critical to ensure a positive cash position is sustained. It’s important to identify the key cash drivers for your company’s operations, as well as to understand how the current period compares to a prior period. A cash flow statement can provide a clearer picture of a company’s ability to pay creditors and finance growth.