Cash Flow Statement

Short definition

The cash-flow statement splits the change in cash and cash equivalents into operating, investing and financing activities. It is the bridge between accrual profit and the cash balance.

Detailed explanation

Operating cash flow adjusts accrual profit for working capital, provisions and non-cash items. Investing covers PPE and certain financial investments; financing covers draws, repayments, equity and dividends. IAS 7 allows choices on interest and dividends, so peer comparison requires aligned classification.

The CFO turns the statement into three questions: does the operation produce cash, is investing cash consumption sustainable, and is financing closing a gap or widening it? One-off asset sales can inflate operating or investing cash; repeatable cash generation is read separately.

Why it matters for the CFO

Credit committees and the cash budget look at cash, not profit. Principal repayments do not hit the P&L; they appear here and in the debt note. Free cash flow is also built from these lines.

How to read it

Strong operating cash with heavy investing or financing outflows is growth or de-levering; the reverse is cash burn or a refinancing need. A rising cash balance is not health by itself if it came from a new draw. The 13-week budget is this statement, looking forward at higher frequency.

Definitions are educational. They are not investment, credit or tax advice.