Cash Flow
Cash Flow Statement · Statement of Cash Flows
One of the three core financial statements — shows the actual movement of cash in and out of the company, split into operating, investing, and financing activities.
What it is
The Cash Flow Statement complements the income statement and balance sheet — while the income statement shows accounting profit (affected by non-cash items like depreciation), the cash flow statement shows actual cash that flowed through the company.
It is divided into three sections:
- →Operating CF (OCF) — cash from day-to-day operations
- →Investing CF — cash used for investments (CAPEX), acquisitions, purchase/sale of securities
- →Financing CF — cash from/to financing: issuance or repayment of debt, share buybacks, dividends
Free Cash Flow (FCF) is derived from the statement as OCF minus CAPEX — it is not a line the statement itself directly reports.
Why track it
Cash flow is more resistant to accounting manipulation than the income statement — profit can be influenced by accounting method choices (depreciation, revenue recognition), but cash in the bank either exists or it does not. A company with rising profit but falling operating cash flow is a warning signal — it may indicate receivables collection problems or aggressive accounting choices.
Real-world example
Microsoft FY2025: Operating CF $100.4B, investing CF negative (CAPEX and acquisitions), financing CF negative (buybacks and dividends exceed new debt). The sum of all three determines the net change in cash on the balance sheet for the year.