Cash flows statement is an important report that both management and external readers want to have a look to determine the true state of a business entity’s cash flows—which can’t be found within the income statements and balance sheet under the accrual method of accounting. So what is the six important things you need to know about cash flows statement?

This isn’t uncommon that a company may show a great profit on its income statement but has no sufficient cash to pay its debt and dividend.

By carefully examining the cash flows statement—and comparing it to the income statements and balance sheet, one can get a better view and take a conclusion whether a company is or isn’t really in a great profit—as it may show in its income statements. A cash flows statement reveals the cash inflows and outflows experienced by an organization during a reporting period—monthly, quarterly, semi-annually or annually. The types of cash flows presented are divided into those related to operations, investment activities, and financing activities. Here are six important things you need to know about cash flows statement.