Cash Flow Statement

The cash flow statement tracks the actual cash moving in and out of a company over a period, sorted into three sections: operating, investing, and financing activities. It reconciles the accrual-based income statement with what happened in the bank account.

Operating cash flow starts from net income and adjusts for non-cash items (depreciation) and working capital swings (customers paying late, inventory building). Investing covers capex and acquisitions. Financing covers debt raised or repaid, shares issued or bought back, and dividends paid. The three sum to the period's change in cash.

This is the statement where accounting stories go to die. Earnings can be shaped by estimates and accruals; cash collected is cash collected. A company reporting strong net income alongside persistently negative operating cash flow is the classic pattern that precedes restatements.