Financial statements prepared according to generally accepted accounting principles (GAAP) require a Statement of Cash Flows as part of the information provided. Why cant lenders just use the income statement to determine cash flow?

The income statement uses accrual accounting which recognizes sales when cash is received and expenses when they are paid and the statement of cash flows matches expenses with the revenues they created.

Lenders can use the income statement to calculate cash flow. The statement of cash flows required by GAAP is for management of the company to use.

The income statement reflects actual cash receipts and disbursements and the statement of cash flows adds information regarding dividends and capital expenditures.

The income statement reflects revenue when it is earned which is not necessarily at the same point that cash is received and some expenses are matched with the revenues they created and not expensed when they are actually paid. As a result, net profit does not equal cash flow.