What does a cash flow statement show?

• A. Actual inflows and outflows of cash or cash equivalents.
• B. Projected revenues for future periods.
• C. Net income from operations.
• D. Budgeted cash receipts.

Answer: (A)

A cash flow statement focuses on actual cash movements and liquidity. It shows the actual inflows and outflows of cash or cash equivalents during a period and tracks how those movements combine to produce the ending cash balance. This information is organized into operating activities (cash generated by core operations), investing activities (cash used for or from long-term assets), and financing activities (cash from borrowing, repaying debt, or equity transactions). The key point is that it reflects real cash transactions, not accounting profit or future estimates.

Projected revenues for future periods are forecasts, not actual cash outcomes, so they belong to budgets or pro formas rather than the cash flow statement. Net income from operations is a profitability metric derived on an accrual basis in the income statement, not an exact measure of cash flow. Budgeted cash receipts are planned amounts, not the actual cash that flowed in during the period.