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Cash Flow Statement, Statement of Cash Flows


Cash Flows Statement Training

The cash flow statement shows the cash moving into a business, called the inflows, and the cash moving out of a business, called the outflows. The statement of cash flows is divided into three categories, cash from or used in operating activities, cash from or used in investing activities, and cash from or used in financing activities.


In our sample cash flow statement amounts are shown in thousands (000).

The cash from operations is a positive $498,000 for the period. This is a number you want to see grow. This is the cash flow from the day-to-day operations of the business.

The cash used from investing is a negative $185,000 for the period. They purchased property, plant and equipment and sold an asset. This is the cash flow for any capital expenditures and acquisitions. It also includes the sale or purchase of property and equipment.

The cash used from financing is a negative $302,000 for the period. They went into their credit line, used a long-term loan, and they paid a dividend. This cash flow includes receiving or paying back loans, or purchasing or selling company stock.

The cash balance changed by increasing the balance to $83,000 cash at the end of the period. This reconciles to the cash line of the balance sheet.

Cash Flow Statement

Book Excerpts:

(Excerpts from Financial Intelligence, Chapter 17 – The Language of Cash Flow)

You can see right away that there is a lot of useful information in the cash flow statement. The first category shows operating cash flow, which in many ways is the single most important number indicating the health of a business. A company with consistently healthy operating cash flow is probably profitable, and it is probably doing a good job of turning its profits into cash. A healthy operating cash flow, moreover, means that it can finance more of its growth internally, without either borrowing or selling more stock.

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