If you only had one statement what is the best financial statement to use when reviewing the overall health of the company?
Answer
You would use the Cash Flow Statement because it gives a true picture of how much cash the company is actually generating. Getting a clear picture of the cash trends are highly important. The Cash Flow Statement gives the best picture because it tracks all changes in cash, including those not captured on the Income Statement such as changes in Working Capital and Capital Expenditures.
Why this matters to bankers
Bankers won’t ever be in this situation. Think of this question of proof that cash should always be at the forefront of your mind and the first thing you look at when evaluating a business (if not first then at the same time as Revenue and EBITDA).