Cash Flow Statement

Case flow statement

• A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company
• Measures how well a company manages its cash position, meaning how well the company generates cash to pay its debt obligations and fund its operating expenses
• The main components of the cash flow statement are cash from operating activities, cash from investing activities, and cash from financing activities.
• Cash from operating activities (business activities)
• Reflects how much cash is generated from a company's products or services
• Generally, changes made in cash, accounts receivable, depreciation, inventory, and accounts payable are reflected in cash from operations
• e.g., if accounts receivable decreases, this implies that more cash has entered the company from customers paying off their credit accounts
• Cash from investing activities
• e.g., a purchase or sale of an asset, loans made to vendors or received from customers, or any payments related to a merger or acquisition, etc
• Cash from financial activities
• e.g., payment of dividends, payments for stock repurchases, and the repayment of debt principal (loans), etc.
• Negative case flow
• Sometimes, negative cash flow is the result of a company's decision to expand its business at a certain point in time 
• This is why analyzing changes in cash flow from one period to the next gives the investor a better idea of how the company is performing
• Used for fundamental analysis
• The cash flow statement is important because it's very difficult for a business to manipulate its cash situation. 
• There is plenty that aggressive accountants can do to manipulate earnings, but it's tough to fake cash in the bank.