Investing for Beginners , investing

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Cash Flow Statement

 

Cash flow statement is one of the three main financial statements (others are income statement and balance sheet). If income statement exposes income that was received according accounting standards, cash flow statement provides summary information about real cash payments that company was sending out or receiving.

 

There are two types of cash flow statement (direct method and indirect method) and those are completely different to read. However, cash flow statement may signal if company could be facing the shortage of cash and cannot continue its activity without problems. 

 

Cash flow statement provides information about cash flow movements in three segments:

  • Cash flow from operating activities includes received and paid cash from main company’s activity.
  • Cash flow from investing activities reports payments from sold and purchased long term investments
  • Cash flow from financing activities covers new borrowing or borrowing that was repurchased, dividends, stock issues or stock buybacks and similar financial activity.

 

 



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