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Cash Flow Statement

It is a financial statement that lists out a company’s cash inflow and cash outflow during a specific period. Through this, we could see why cash increased or decreased during a period. All transactions being done with cash will be recorded down in three different categories, which are operating, investing and financing. A cash flow statement generally looks like below:

Cash flow statement format - operating, investing and financing activities

Section 1: Operating Activities
Reflects cash transactions that are done on the basis of day-to-day operation. This should be the most principal part of the statement as it is directly related to the daily operation of company. Components that could be found under operating activities include:

Operating activities in Cash Flow Statement

Furthermore, transactions in operating activities will also determine the net income / losses of a company, by deducting expenses from the revenues. Hence, we can see that transactions in operating activities will affect the income statement, current assets and current liabilities. For instance, raw material that is bought in from supplier will now become the current asset of a company.

Section 2: Investing Activities

Here, it explains about the investment that a company has undertaken. For instance, purchase and sell of assets, giving out loans to other companies. Transactions in this section generally will affect the long term asset of a company. Selling off an old manufacturing plant will reduce the total asset of a company.

Investing activities in Cash Flow Statement - explains about investment that company made, such as long term asset

Section 3: Financing Activities

Financing refers to how a company is funded. Since a company could be funded by either debtors or shareholders, this section will thus affect a company’s long term liabilities or owner’s equity. It will generally list out activities where cash is obtained from owners, and activities where resources (cash) are returned to owner.

Financing activities in Cash Flow Statement - explains about how a company is funded

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