Cash flow statement

A cash flow statement is a financial report that shows the movement of cash into and out of a company over a specific period, typically monthly, quarterly, or annually. It tracks the company’s cash transactions in three key areas: operating activities, investing activities, and financing activities. This statement helps investors, creditors, and management understand how the company is generating and using cash, ensuring its liquidity and overall financial health.

The Three Sections of a Cash Flow Statement: 

• Operating Activities

• Investing Activities

• Financing Activities

---

Operating Activities.

This section shows cash flows from the company’s core business activities, such as selling products or providing services. It reflects how much cash the company generates or uses in its day-to-day operations.

Common cash inflows include:

• Cash received from customers

• Payments from contracts or services

Common cash outflows include:

• Payments to suppliers

• Wages, utilities, and other operating expenses

• Interest paid on loans or taxes

---

Investing Activities.

This provides insight into a company’s long-term investment strategy and growth prospects. This section relates to buying or selling long-term assets and investments.

It reflects a company’s;

• spending on growth and asset acquisition, and

• cash generated from selling those assets.

Common cash inflows include:

• Proceeds from the sale of property, equipment, or investments

• Cash received from selling business units or securities

Common cash outflows include:

• Cash spent on purchasing property, plant, and equipment (capital expenditures)

• Buying investments or acquiring other companies

---

Financing Activities.

Financing Cash Flow reveals how a company is raising capital and returning value to shareholders. This section records cash flows between the company and its investors or creditors. It shows how a company finances its operations and growth, whether through debt, equity, or dividends.

Common cash inflows include:

• Cash from issuing shares or bonds

• Proceeds from borrowing (e.g., loans or bond issuance)

Common cash outflows include:

• Repaying debt (loan repayments)

• Dividends paid to shareholders

• Share repurchases