Cash Flow Statement Basics Explained

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Dive into the world of finance with our comprehensive guide on understanding the cash flow statement. Often overlooked yet vital, the cash flow statement reveals the effectiveness of a business in managing its cash. It's crucial for assessing a company's financial health.

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The Cash Flow Statement is one of the 3 main Financial Statements. It will show you how effective a business is in managing its cash.

✨ Key Highlights:
▪️ Cash Flow Statement Basics: Learn why the cash flow statement is an essential financial statement, alongside the income statement and balance sheet.
▪️ Three Main Sections: Explore the three parts of the cash flow statement: Operations, Investing, and Financing activities, and understand how each affects a company's cash flow.
▪️ Operations Cash Flow: Discover the two methods to calculate this - the direct and indirect methods - and why adjustments like depreciation, amortization, and working capital changes are crucial.
▪️ Investing and Financing Activities: Understand how cash flow from investing and financing activities is reported, including purchases of assets, issuing shares, and paying dividends.
▪️ Reconciliation to Balance Sheet: See how the cash flow statement ties back to the balance sheet, ensuring that the cash flow reported matches the net change in cash.

Most companies apply Accrual Accounting and it's important to understand that under this method revenue does not always equal cash in, and incurred expenses do not equal cash out. Therefore, don't make the mistake to just look at the income statement and the balance sheet. Focus on the Cash Flow Statement as well because it will show you where the company makes and spends its money.

00:00 How to Read a Cash Flow Statement
02:00 Cash Flow Statement - Overview
03:57 Cash Flow from Operating Activities
10:33 Cash Flow from Investing Activities
11:17 Cash Flow from Financing Activities

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