The manipulation of income statements is far too easy these days, and too frequent. That's why some experts argue that the true value of a company is only as great as the net present value of its future cash flows. Simply put, cash flow measures the money a company generates from its business. Even cash flow, however, doesn't tell the whole story. It is typically found after the better-known balance sheet and income statement in a firm's financial filings.
Balance sheets give a snapshot of a company's assets and liabilities.
Income statements indicate the business' profitability during a certain period. The statement of cash flows acts as a kind of corporate checkbook that reconciles the other two statements. It records the company's actual cash transactions during the period, recognizing the reality that all those lovely revenues booked on the income statement may not have been actually collected. Moreover, all the expenses the company accrued don't have to be paid right away. These are scenarios that could inflate the beloved net income.