Dictionary / Financial statements
What Is a Cash Flow Statement?
A cash flow statement shows where a company's cash came from and where it went during a period. Cash is harder to dress up than profit, so many investors trust it most.
The three sections
- Operating: cash from the normal business. See operating cash flow.
- Investing: cash spent on or earned from long-term things, like factories. See capital expenditure.
- Financing: cash from borrowing or selling shares, and cash paid back through debt repayments, dividends and buybacks.
Why profit and cash differ
A company can book a sale today but get paid in three months. It can also count depreciation as a cost even though no cash leaves. So a company can show profit while running out of cash, or the other way around.
What to look for
Healthy companies bring in more cash from operations than they report as net income, year after year. Operating cash minus capital spending gives free cash flow.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
Free cash flowReal cash left after running and growing the business.
Operating cash flowCash brought in by everyday business.
Capital expenditureMoney spent on long-lasting things like factories.
Income statementShows revenue, costs and profit.
Balance sheetShows what a company owns and owes.
Earnings reportA company's report card, every three months.