Cash Flow Statement - overview

The cash flow statement tracks real cash coming in and going out during the period. Unlike the P&L, which records revenue and costs when they're earned or incurred, the cash flow only counts when money actually moves.

This is the most honest statement of the three. Profits can be massaged through accounting policy; cash can't be.

Three buckets

Every cash flow statement is split into three sections:

1. Cash from Operating Activities (CFO) - what the core business generated. This starts from net profit (PAT) and adjusts for non-cash items (depreciation), working capital changes (receivables / inventory / payables movement), and tax actually paid.

2. Cash from Investing Activities (CFI) - money spent on long-term assets (new factories, equipment, acquisitions, software). Usually negative - companies invest to grow. Also includes interest received on investments.

3. Cash from Financing Activities (CFF) - capital raised (debt issued, equity raised) minus capital returned (debt repaid, dividends, buybacks). Tells you how the company is funded.

Cash Flow Statement - overview

This is the most honest statement of the three. Profits can be massaged through accounting policy; cash can't be.

Three buckets

Every cash flow statement is split into three sections:

3. Cash from Financing Activities (CFF) - capital raised (debt issued, equity raised) minus capital returned (debt repaid, dividends, buybacks). Tells you how the company is funded.