A statement of cash flows shows how a company spends its cash (outflows), and where a company receives its money (inflows). Cash flow analysis is the examination of a cash flow statement and analyzing all the inflows and outflows of cash from the business.
From a financial accounting standpoint, the company might be profitable, but if the receivables are not paid in time or are never collected, the company could have financial issues. Even the best companies can struggle to manage their cash flow adequately, which is why doing a cash flow analysis is a critical tool to have in our toolbox when evaluating companies.