Cash Flow

Statements of Cash Flow are required financial documents for publicly traded firms. The Statement of Cash Flow is used to identify the sources and uses of funds that flowed through the firm. This statement should not be confused with a cash flow schedule that is used as a forward planning tool. The Statement of Cash Flows measures what did happen over a period of time; usually the past calendar or fiscal year. The cash flow schedule is used to project future cash needs and may be as short as projections month by month for the next year or planning period.

3 Areas that Cash is Generated or Spent

There are three main areas through which cash originates or is spent.

Cash flow from operations:

This area of the financial document reveals the affect general business operations play in the growth or reduction in total cash flow. This is the cash flow based solely on the producing and selling of products and services. It does not include and money spent or received from the purchase or sale of any long lived asset. This measures Operations Manager's effectiveness to produce free cash flow.

Cash flow from investment activities:

In this area the management team is evaluating how well they did in creating free cash flow from the sale and purchase of assets. This measures the Finance Manager's effectiveness to produce free cash flow.

Cash flow from financing activities:

Here the firm is measuring the impact of expanding or retiring debt, or the effects of buying or selling more of the firm's stock of any type.

After each area is evaluated all three are consolidated into one statement called the Statement of Cash Flows.

Integrated Financials and Cash Flow Worksheet

If you have some experience with calculating cash flow and integrated financials and would like to run some numbers, try our online worksheet.

Integrated Financials and Cash Flow Worksheet - Advanced (NEW WINDOW)