A cash flow statement is an accounting document which shows the amount of cash held by a company over a defined period of time. It records the various transactions the company engaged in and how they affected its cash reserves. The cash flow statement may also record the level of other assets which are deemed to be equivalent to cash. To meet this description, the assets have to be highly liquid, meaning they can be sold very easily and thus converted into cash.
Cash flow statements are used primarily to give outsiders an impression of the health of a business. For example, they would be of interest to those thinking of investing in the company, to other companies considering a merger or takeover of the company or to creditors anxious about whether or not they were going to be repaid.
Of course, at a deeper level, a company may have non-liquid or intangible assets which may be of great value. For example, patents or copyrights can be immensely valuable assets and reputation or branding can be worth a great deal too even though it is difficult to quantify their worth. A cash flow statement would not include assets such as these and so cannot be considered a comprehensive view of a company’s value.