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The Three Parts of Cash Flow Statements Explained

In: Business and Management

Submitted By elchaman
Words 509
Pages 3
The cash flow statement is the newest of the three financial statements; companies have only been required to furnish investors with it since 1988. The cash flow statement is similar to the income statement, except that it dispenses with some of the abstract items found on the income statement (such as depreciation) and focuses on actual cash. Most of the information found on the cash flow statement is contained in either the income statement or the balance sheet, but here it is organized in such a way that it is difficult for companies to use accounting tricks to obscure the facts. The cash flow statement is broken down into three parts:
Cash Flows from Operating Activities

Here you'll find how much money the company received from its actual business operations.
This does not include cash received from other sources, such as investments. To calculate the cash flow from operating activities, the company starts with net income (from the income statement), then adds back in any depreciation expenses, deferred taxes, accounts payable and accounts receivables, and one-time charges.
Cash Flows from Investing Activities

This section shows how much money the company has received (or lost) from its investing activities. It includes money that the company has made (or lost) by investing its excess cash in different investments (stocks, bonds, etc.), money the company has made (or lost) from buying or selling subsidiaries, and all the money the company has spent on its physical property, such as plants and equipment.
Cash Flow from Financing Activities

This is where the company reports the money that it took in and paid out in order to finance its activities. In other words, it calculates how much money the company spent or received from its stocks and bonds. This includes any dividend payments that the company made to its shareholders, any money that it made by

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