Cashflow Report Demystified

Your cash flow report should be answer the following questions with accuracy and precision;


  • How much does your company have right now?
  • How much cash did your company generated?
  • And what was the cash generated was used for?


If you come across it as statement of cash flows and it can be a one page statement to several pages. In the cash-flow statement, the in-flow and out-flow of cash within a set period. What the cash-flow expresses is the liquidity and not the level of profitability.


The cash flow report can be broken down into three in an online accounting software; cash from operating activities, cash from investing activities, and cash from financing activities. When a cash flow is based on generally accepted accounting principles (GAAP), a fourth category known as disclosure of noncash activities.


Cash flow report allows for a comparison of the inflow and outflow of cash to guage the performance of a business.


Depending on the type of business you run, the cash flow report always follows the same format. Through this guide below, you should know what to look out for when looking into a cash flow statement.


Cash From Operation Activities

Usually, a cash flow statement is computed by a cloud accounting software using the indirect method. But essentially, this is the step used in computing this section;




When all the necessary adjustment has been effected, you’ll have the net cash generated from the company’s operating activities.


Cash From Investing Activities

This section captures the changes in long-term investments and capital expenditure. Capital expenditure in this context can be purchase of machinery, equipment and operation vehicle. While long term investments range from debt, and other equity.


Usually, there’s always a cash outflow from investing activities. For example, when a company buys a car, furniture, fixtures or equipment, it is calculated as outflow. While it is considered as cash inflow when a company divests the assets.


Cash From Financing Activities

When there’s a change in the long-term liabilities and equity section of the balance sheet, it appears as financing item on the cash flow report. When the business issues or repurchase stocks, shares and bonds, it is considered a financing activity.


When capital is raised by the firm, it is deemed as a cash inflow while payment of dividend is seen as cash outflow.


Bottom Line

In simple terms, a cash flow statement shows the present strength and the future outlook of a business. Through the cash flow report, it will be glaring whether a business has enough liquid cash to offset it expenses. Through the cash flow report, a business can predict expenses for the future and use in computing budget for the future.

For an investor, looking through the cash flow report might give an assurance of success. However, a negative cash flow does not always translate to a bleak future for a business, it may point to expansion by the company which creates a need for a higher cash outflow.

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