This article is an introductory cash flow statement (CFS) overview. For the detailed version, please visit our blogs on the subject: Cash Flow Statement Basics and Cash Flow Statement 2: Electric Boogaloo.

The CFS is the financial statement that summarizes a company’s various movements of cash and cash equivalents, whether in or out.

The purpose of the CFS, and why all of you should be using this, is that it measures how well an organization is managing its cash position, which roughly means how well the company is generating or earning cash to counteract and pay its various operating expenses and debts.

The three major components of the CFS are:

  • Operating activities
  • Investing activities
  • Financing activities

The two primary methods of calculating a company’s cash flow are the following:

  • Direct method
  • And the indirect method (because, of course, it was going to be indirect. Come on, how about the standoffish avarice method? Or the process of taking the road less traveled?

The direct method calculates the sum of all cash payments and receipts, including payments to suppliers, cash receipts from customers, and cash-paid salaries.

The method that needs a less obvious name is calculated by adjusting the overall net income by adding or subtracting the differences from non-cash transactions.

So, you can avoid using a CFS…if you don’t want to be SUCCESSFUL. But since you are reading this, I know that isn’t true. So here is to being successful by using a CFS.