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The statement of cash flows is used to understand how a company is doing with their operations, investments, and finances (Young, et al.,2019). All businesses need to understand their financial statements, and more importantly their statement of cash flows. It is important to understand the statement of cash flows because owners need to know where their money is going and where it is coming from. Small businesses should not solely focus on the bank balance because they need to be aware of what bills need to be paid and what products are making a positive impact for the business. If they do not pay attention to their statement of cash flows their business could fail within the first couple of years if they are not aware of their financial statements properly. One piece of information that can be found on the statement of cash flows that is just as important as the bank balance or more so is investment. If a company is not taking the risks of investing they are holding their small business from growing. Investors might not be interested in the company if that is the case. In order for money in the bank to rise investments need to be made, which is also known to come with a risk of potentially doing the opposite.
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