Thread: Cash Flow Statement

As we all know that Financial statements of company consists of 3 main things: Balance Sheet, Statement of Profit & Loss & Cash Flow Statement.

Cash flow statement (CFS) as the name suggests is a statement which shows the flow of cash or movement of cash from and within the business.
Let us deep dive into it.

There are 3 main activities of CFS: Operating activities | Investing activities | Financing activities.

Operating Activities: These are primary business activities. Eg: For an FMCG company, cash generated from sale of it's products or receivables from its customers will come under cash flows from operating activities. (receipt of payment from debtors,

payment to creditors etc are operating activities)

Investing Activities: This part shows depicts the investments made by company. Eg: Purchase/Sale of fixed assets, Purchase/Sale of investments etc. When company generates cash from its business,

It usually deploys that in buying fixed assets for future expansion which can be seen as increase in fixed assets.

Financing Activities: This part deals with cash flows to and from the owners/lenders. The inflows can be in form of equity capital or borrowings and the outflows can be in form of Dividends, Interest payments and debt repayments.

Tip: Cash flow statement is lesser prone to manipulations unlike Profit and Loss Statement, An investor should analyse CFS to see if company is generating enough cash from operations to invest and finance its business.