Cash flow statement

Welcome to our session on the Cash Flow Statement, an essential financial statement for understanding how cash moves through a business. While income statements and balance sheets are familiar, the cash flow statement provides unique insight by focusing on actual cash inflows and outflows. A business can be profitable on paper yet struggle with cash shortages. The statement of cash flows reveals where the cash came from and where it went, regardless of accounting standards. The cash flow statement is organized into three main sections: operating activities, investing activities, and financing activities. Operating activities cover the cash generated by the company’s core business operations, such as receipts from customers and payments to suppliers and employees. Investing activities reflect cash spent or received from investments, like the purchase or sale of property, plant, equipment, or other long-term assets. Financing activities capture the cash flows from borrowing, repaying loans, issuing shares, or paying dividends. This separation allows stakeholders to clearly see which activities drive changes in the company’s cash position over a period. There are two accepted approaches for reporting cash flows from operating activities: the direct and the indirect method. The direct method lists specific cash receipts and payments, offering a clear view of exactly where cash comes in and goes out. The indirect method, which is more commonly used, starts with net profit and adjusts for non-cash items—such as depreciation—and