What this unit covers
Understand why cash flow can tell a different, more honest story than profit alone, and why investors watch it closely.
By the end you will be able to
- Explain why a company's profit can differ from the cash it actually holds.
- Describe what operating, investing, and financing activities each reveal.
- Explain why a negative cash flow figure is not automatically a bad sign.
How it starts: A Healthy Profit, An Unpaid Bill
- A company you hold reports a profit of 60 crore rupees this quarter.
- Its bank account holds only 15 crore rupees when the results come out.
- Where are the other 45 crore rupees of that profit?
Words you will meet
- Cash Flow Statement
- The financial statement that records actual cash moving in and out of a company.
- Operating Activities
- Cash from a company's core business, such as sales collected and expenses paid.
- Investing Activities
- Cash spent or earned from buying or selling long term assets like equipment.
- Financing Activities
- Cash from loans, shares issued, or dividends and repayments paid out.
In this module: Reading Financial Statements
- Balance Sheet Made Easy
- Profit & Loss Statement
- Cash Flow Statement (this unit)
- Connecting All Three Statements
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