Glossary · Accounting & Audit
Cash Flow Statement
A financial statement that summarises the cash and cash-equivalent inflows and outflows of a company during a period, classified into operating, investing, and financing activities.
Required under Section 129 of the Companies Act, the cash flow statement is prepared using the indirect method (starting from profit before tax and adjusting for non-cash items, working capital changes, and the actual cash spent on investing and financing activities). It is essential for assessing liquidity and the ability to service debt. Listed companies with net worth above ₹500 crore must also file a consolidated cash flow statement.
Examples
A company earning ₹10 lakh PAT but with ₹15 lakh increase in receivables shows only ₹-5 lakh operating cash flow — a sign of working capital stress.