August 15, 2020

Belated #TBT: The Birth of the Cash Flow Statement

No financial statement tells the story of a company quite like the statement of cash flows.  It's simple, yet powerful, like The Sun Also Rises or "The Contest" or Where's Spot? Everyone can enjoy it.

But where did this thing of beauty originate? Did the balance sheet and income statement party too hard one night only to wake up next to each other and become unexpected, albeit happy, financial statement parents? 

Not exactly. The story starts with The Dowalis Iron Company, one of the "founding forces of the Industrial Revolution" according to a paper entitled The Evolution of Income Accounting in Eighteenth and Nineteenth Century Britain by Izumi Watanabe (please forgive the janky images):

These days, many companies don't even bother asking "Where has the profit disappeared to?" because they never get to the "profit" part.

Let's give it up for the cash flow statement.  

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