The cash flow statement will help us understand the inflows and outflows of cash over the time period we’re looking at.

Cash flow statement overview

The cash flow statement, or statement of cash flow, consist of three components:

  • Cash from operations
  • Cash used in investing
  • Cash from financing

Each of these three sections tells us a unique and important part of the company’s sources and uses of cash during the time period being evaluated.

Many investors consider the cash flow statement the most important indicator of a company’s performance and it’s hard to imagine that until only recently companies didn’t even have to file a cash flow statement.

Today, investors quickly flip to this section to see if the company is actually making money or not, and what its funding requirements are.

It’s important to understand how different ratios can be used to properly assess the operation of an organization from a cash management standpoint.