International Bowling Pro Shop & Instructors Association​

Cash Flow Statement

A cash flow statement reports the amount of cash generated during a given period of time. It’s intended to provide information on a business’s current liquidity and solvency as well as its ability to change cash flows in the future.

  1. The three main components of a cash flow statement are:
    Cash from operations refers to all cash flows regarding business operations. Operating activities can include production, sales, delivery of a business’s product, and payments from customers. It can also include purchasing materials, inventory costs, advertising, and shipping.
  2. Cash from investing arises from actions where money is being put into something with the expectation of a gain over a long period of time.
  3. Cash from financing results from borrowing, repaying, or raising money for the business

These three sections highlight a company’s sources of cash and how that cash is being used. Many investors consider the cash flow statement to be the most important indicator of a business’s performance.

There are a variety of ratios you can pull in your cash flow statement. Here are a few to help you start measuring the quality of your cash flow and create a cash flow analysis:

  • Operating cash flow to net sales tells you how many dollars in cash are generated for dollars of sales. It’s a percentage of a business’s operating cash flow to its net sales from the income statement.
  • Operating Cash Flow to Net Sales (%) = Operating Cash Flow ÷ Net Sales
  • Free cash flow measures how efficient a company is at generating cash.

To calculate free cash flow, find the net cash from operating activities and subtract capital expenditures required for current operations.

  • Free Cash Flow = Cash from Operating Activities – Capital Expenditures for Current Operation