Cash Flow Statement

A cash flow statement is a financial statement that summarizes all cash inflows received by a
company from continuing activities and external investment sources. It also covers all cash outflows
used to fund corporate operations and investments over a certain time period [ CITATION Ada20 \l
1033 ].

The cash flow statement is seen as the most intuitive of all financial statements. It tracks cash
generated by the business in three ways: operations, investment, and financing. Net cash flow is the
total of these three components; it represents the sum of all the transactions made by a company.

Cash Flow from Operating Activities

This is the first section of the cash flow statement, and it comprises cash flows from operating activities
(CFO) and transactions from all operational company operations. Other types of inflows and outflows,
such as investments, debts, and dividends, are excluded. In other words, it is the company's net income
in cash form.

Cash Flow from Investing Activities

This is the second section of the cash flow statement and it examines cash flows from investing.
Cash spent on property, plant, and equipment is also included in this part. When capex increases, it
usually indicates that cash flow decreases. However, this is not necessarily a bad thing because it may
signal that the firm is expanding.

Cash Flow From Financing Activities

The last section of a company's annual financial statement is cash flows from finance, which
gives a summary of cash utilized in business financing. It is a measure of cash flow between a firm, its
owners, and its creditors, and it is often derived from debt or stock. Analysts use it to calculate how
much money the firm has distributed through dividends or share buybacks.

Cash Flow Analysis

According to[ CITATION Say \l 1033 ], cash flow analysis refers to the examination or analysis of
the various cash inflows and the cash outflows of the company during the reporting period. These
include the operating activities, investing activities and financing activities.

A cash flow analysis analyzes a company`s working capital, or how much money is available to
operate operations and execute transactions.

Common Size Analysis of Cash Flow

Each line item on your financial statement is represented as a percentage of a base number in
vertical analysis. Vertical analysis may assist you in determining how your business performs year over
year and in comparison to rivals. It also allows you to view the influence of each line item on your
company's total revenue, cash flow, or asset figures. The common size cash flow statement analysis
largely relies on total revenue as the base figure. Here, you’ll render items on your cash flow statement
as a percentage of net revenue. This analysis lets you see how effectively you’re leveraging the cash in
your business, beyong just the absolute value of cash flowing and out of the business [ CITATION Bil20 \l
1033 ].