what is the importance of free cash flow to investors
While that explanation seems simple enough, it's a big mess in practice, and the statement of cash flows helps investors sort it out. The statement of cash flows is very important to investors because it shows how much actual cash a company has generated. The income statement, on the other hand, often includes noncash revenues or expenses, which the statement of cash flows excludes. One of the most important traits you should seek in a potential investment is the firm's ability to generate cash. Many companies have shown profits on the income statement but stumbled later because of insufficient cash flows.