What is Cash Flow Statement?

The Cash Flow Statement is one of the three core financial statements that summarizes the movement of cash and cash equivalents into and out of a company over a specific period. It is crucial for assessing a company's ability to generate cash to pay its debts, fund its operations, and make investments. It is broken down into three sections: Cash Flow from Operating Activities, Investing Activities, and Financing Activities.

For Startups: For a pre-profitable startup, the Cash Flow Statement is often more important than the Income Statement. It shows the company's net burn rate and runway, which are critical survival metrics. Investors use it to understand exactly how the company is using its cash.

Example: A startup might have a net loss of ₹10 Lakhs on its Income Statement, but its Cash Flow Statement might show that its cash balance only decreased by ₹5 Lakhs, due to non-cash expenses like depreciation.