What does a cash flow statement indicate?

A cash flow statement primarily indicates the flow of money in and out of the business. This financial document provides insights into the company's liquidity and overall financial health by detailing the cash generated and used during a specific period. It reflects all cash transactions categorized into operating, investing, and financing activities, allowing stakeholders to understand how cash is managed, how operating activities generate cash, and how investments and financing shape the cash position.

This is distinct from other financial indicators like total profit, which focuses on net income incorporating expenses, revenues, and gains, or outstanding debts, which detail liabilities but do not provide a picture of cash movement. Additionally, long-term investment returns relate to the performance and profitability of specific assets over time rather than tracking day-to-day cash flow. This makes the cash flow statement vital for assessing financial sustainability and operational efficiency.