Cash flow statement
The cash flow statement traces actual cash inflows and outflows over a financial year, broken down by operating, investing, and financing activities. It complements the balance sheet and income statement to give a true picture of cash health.
In practice
A company can be profitable on the income statement while simultaneously short of cash if customer receivables take a long time to collect. Positive operating cash flow proves the core business generates cash without relying on borrowing or asset sales. For a franchise network in expansion, investing cash flow will be heavily negative in the early years — openings, training — before operating cash flow takes over.