Topic 4 ‐ Tracking your cashflow

Revision notes

Key Learning Points

What is the cash flow statement?

The cash flow statement explains the change in cash during a period. It is linked to the dynamic
accoun ng equa on and classifies cash flows into economically sensible categories.

Major cash flows

The major cash flow categories are: cash flow from opera ons, cash flow from investments, cash
flow from financing.

Cash flow importance

Cash flow statement enables the management and investors to assess the cash genera ng capacity
of a company.

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 Topic 4 ‐ Tracking your cashflow
Revision notes

Main Vocabulary
Cash flow from financing ac vi es: This represents the difference between the inflow and ou low
of cash from financial ac vi es. Inflows could come from sources such as cash from investors (new
equity introduced) or new loan capital raised. Ou lows could come from transac ons such as
payment of dividends to shareholders, loan repayments and the interest on loans.

Cash flow from investments: This represents the difference between the inflow and ou low of
cash from inves ng ac vi es. Inflows could come from sources such as the sale of fixed assets (e.g.
property) or investments. Ou lows could come from transac ons such as the purchase of fixed
assets or investments.

Cash flow from opera ons: This represents the difference between the cash receipts from selling
the firm’s products or services and the cash payments on opera ons.

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