Reading the accounts
Cash flow statement
The statement tracking actual cash moving in and out, split into operating, investing and financing.
How it works
Operating cash flow is cash from running the business. Investing covers buying and selling long-term assets. Financing covers borrowing, repaying, dividends and share issuance or buybacks.
It is the hardest statement to manipulate, because cash either arrived or it did not. Persistent profits without matching operating cash flow is one of the most reliable warning signs in accounting.
Where it misleads people
Healthy operating cash flow can still be masking trouble if it is achieved by stretching payments to suppliers or squeezing customers. Look at the working-capital lines inside it, not just the total.
Related terms
- Operating cash flowThe cash a company actually generated from running its business.
- Free cash flowCash left over after paying for the investment needed to maintain and grow the business.
- Working capitalThe money tied up in day-to-day operations: inventory and money owed to you, less money you owe.
- Income statementThe statement showing revenue, costs and profit over a period.
- Accrual accountingRecording revenue and costs when they are earned or incurred, rather than when cash moves.
Mentioned in
More in Reading the accounts
- Cost of goods sold
- Cash conversion cycle
- Deferred revenue
- Cash burn
- Depreciation and amortisation
- DuPont analysis
- Breakeven
- EBITDA
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.