The cash flow statement explains how cash changed during a period.
It has three sections:
- Operating activities: cash generated by core operations
- Investing activities: cash used for or received from long-term assets and investments
- Financing activities: cash from debt, equity, dividends, and repayments
Why it matters:
- a company can report profit on the Income Statement while still having weak cash generation
- it helps assess liquidity, reinvestment, and financing dependence
Simple reading guide:
- positive operating cash flow is usually a healthy sign
- negative investing cash flow is often normal for a growing firm
- financing cash flow tells you whether the firm is raising or returning capital