The Cash Flow Statement shows where cash came from and where it went. Three sections: (1) Operating — cash from business operations, (2) Investing — cash spent on assets (equipment, R&D), (3) Financing — cash from investors or loans. The sum = net change in cash.
A profitable company can still have negative cash flow (if customers pay late and suppliers demand early payment). Cash flow tells the real story.
Key Takeaways
- Cash flow has 3 sections: Operating, Investing, Financing.
- Revenue ≠ cash received. Track the actual cash.
- Equipment purchases = investing. Funding rounds = financing.
- Free Cash Flow = Operating CF - CapEx.
Frequently Asked Questions
A company invoices €100K in December but receives payment in February. In December's cash flow statement, this shows as:▼
Answer: €0 cash inflow
Cash flow tracks ACTUAL cash movement. The invoice is revenue (P&L) in December, but cash arrives in February.
Buying a €50K ultrasound device appears in which section?▼
Answer: Investing activities
Capital expenditures (buying equipment) are investing activities.
Receiving €2M from a Series A round appears in which section?▼
Answer: Financing activities
Equity financing from investors is a financing activity. It's NOT revenue.