The cash flow statement is one of the most important financial statements of any business.
It provides information on all activities of a business, over a period, in which the flow of funds i.e. cash, was involved. This includes cash received by the company (inflow) as well as the cash spent by the company (outflow).
There are three parts of a cash flow statement: Operating, Investing, and Financing.
In other words the cash flow statement records all cash inflows and outflows in a business, over a period of a year or a quarter, via its operating, investing, and financing activities.
Cash flow from operating activities includes cash flow from all transactions in normal business activities.
Cash flow from investing activities includes all cash flow from the company's investments, disinvestments, and the resulting profits/losses.
Cash flow from financing activities includes all cash flow from the company's efforts to raise capital via debt or equity as well as any cash returned to shareholders.
The cash flow statement is very helpful to investors in finding out the intrinsic value of a company's stock.
The sum of all these activities results in the net cash flow. When this number is positive, it means more cash is coming into the company than going out and vice versa.
A negative net cash flow number need not be a bad thing. It could mean the company is paying off debt or has paid a special one-time dividend to shareholders.
It's important to remember that the cash flow statement is to be used along with the other two financial statements - balance sheet and income statement - to properly analyse a business.
Jan 13, 2022
How India's biggest IT firm is also a great cash generating machine.
Oct 30, 2021
Should you invest in Paytm's IPO given the negative cash flows and its history of losses?
Aug 13, 2021
Tata Steel's June quarter profits were higher than the full-year profits reported for fiscal 2021.
Dec 10, 2019
How I am using this ultimate financial measure favored by the world's richest man to stay ahead of the game.
Oct 24, 2018
Spin-offs are often misunderstood and thus remains overlooked by many investors. This month's Smart Money Secrets recommendation capitalises on this and offers 63% upside.
Feb 27, 2012
Equitymaster compares two of the biggest players in the cookware industry, viz. TTK Prestige and Hawkins cookers.
Nov 15, 2021
Investing in a property offers a host of benefits and it should be a part of your overall asset-allocation.
Oct 26, 2021
REITs are an investment opportunity worth considering for anyone looking to generate regular income from their investments.
Jun 14, 2021
Investing lessons from a 100-year old candy company.
Jul 1, 2019
How I identified the failure pattern in Cox and Kings in 2016.
Jun 14, 2018
After Inox Wind, you may see more auditors resigning And the reasons can be as funny as they can get.
Mar 31, 2010
India Inc. has had a tough FY09 with excess debt on their books, but now many of them have begun to report a rise in free cash flows.