Statement of Cash Flow

What is the Statement of Cash Flows?

Statement of Cash flow is a statement in financial accounting which reports the details about the cash generated and the cash outflow of the company during a particular accounting period under consideration from the different activities i.e., operating activities, investing activities and financing activities over the specific accounting period.

It is one of the top 3 Financial Statements that helps us understand the flow of cash in the business and how it has moved in and out of the company in a particular period.

Cash Flow Statement

Cash Flow Statement Format

It is subdivided into three categories –

#1 – Cash flow from Operating Activities

It is the cash flow generated from the operation of the business. This cash flow is generated from the principal revenue generation activities of the company. The primary components of this part include accounts receivablesAccounts ReceivablesAccounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance more, inventory, depreciation, and accounts payable.

  • Cash flows from operating activities for Samsung is cash flow from the business of manufacturing and sale of Mobiles, TVs, refrigerators, and other electronic activities, which are its mainstream operating activities and not the cash flow from some sale of investments.
  • Similarly, cash flows from operating activities of Coal India are the cash flows from generation and sale of coal and not from the sale of the old computers lying in its office.

Generally, net income (appearing in profit and loss account) is considered as a primary source of cash flow from operating activities, and the same is adjusted with changes in current assetsCurrent AssetsCurrent assets refer to those short-term assets which can be efficiently utilized for business operations, sold for immediate cash or liquidated within a year. It comprises inventory, cash, cash equivalents, marketable securities, accounts receivable, more and liabilities, non-cash expensesNon-cash ExpensesNon-cash expenses are those expenses recorded in the firm's income statement for the period under consideration; such costs are not paid or dealt with in cash by the firm. It involves expenses such as more and other items associated with investing and financing activities like dividend, interest on debentures, sale and purchase of assets, extraordinary income or expenses, etc.

Let us now have a look at the Statement of Cash flow (Operating ActivitiesOperating ActivitiesOperating activities generate the majority of the company's cash flows since they are directly linked to the company's core business activities such as sales, distribution, and more) of Colgate.

Colgate’s Example

Cash Flow Analysis - Operating Activities

source: Colgate SEC Filings

  • As we note from the above statement of cash flow that Colgate’s Net Income in 2015 was $1,548 million.
  • Cash flow from operations has decreased as compared to the previous periods (2013 and 2014).
  • Also, note that there was Charge for Venezuela accounting change of $1084 million added in 2015.

#2 – Cash flow from Investing Activities

Cash Flow from Investments represents the cash flows from the acquisition or disposal of company long term investments such as investments in subsidiaries and associates, plant & equipment, fixed assets.

If Coca Cola is planning to build a bottling plant in India with an investment of $ 10Mn, the cash outflow of $10Mn is a cash outflow from investment activities.

Colgate’s Example


Cash Flow Analysis - Investing Activities

source: Colgate SEC Filings

  • We note from the above statement of cash flow that there is a cash outflow of -685 million in 2015 and -859 million in 2014.
  • Colgate’s investment in buying core assets was a cash outflow of -691 million in 2015 as compared to -757 million in 2014.
  • Colgate generated $599 million from the sale of marketable securities and investments.
  • Colgate received $221 million from proceeds from the sale of South Pacific laundry detergent business.

#3 – Cash flow from financing activities

It shows the cash inflows and outflows from transactions with providers of financing to the company like banks, shareholders, and promoters.

Some of the examples from financing activities are,

Let’s take a statement of cash flow (financing). A company issued sharesIssued SharesShares Issued refers to the number of shares distributed by a company to its shareholders, who range from the general public and insiders to institutional investors. They are recorded as owner's equity on the Company's balance more of $ 1,50,000 and took a loan from the bank for $30,000 Dividends paid is $ 5,000 interest paid is $2,000.

  • Loan received        $30,000
  • Issue of shares       $ 1,50,000
  • Dividend paid         ($ 5,000)
  • Interest paid           ($2,000)

Total cash flows from Financing =  $ 1,73,000

Colgate’s Example

Cash Flow Analysis - Financing Activities

source: Colgate SEC Filings



Cash Flow Analysis - Alphabet

source: ycharts


Cash Flow Analysis - Amazon

source: ycharts

Box Inc

Cash Flow Analysis - Box

source: ycharts

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This has been a guide to what is Statement of Cash Flows and its definition. Here we discuss the format of cash flow statement, including CFO, CFI, and CFF, along with its interpretation. You may learn more about accounting from the following articles –

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