How to Read a Cash Flow Statement

The cash flow statement shows the actual cash moving in and out of a business, split into three sections.

Operating cash flow is the cash generated by the core business. It is often considered healthier than net income because it is harder to manipulate with accounting choices.

Investing cash flow covers capital expenditures, acquisitions and the purchase or sale of investments. Financing cash flow tracks borrowings, repayments, dividends and buybacks.

A company can be profitable on paper yet consume cash; the cash flow statement is where you see whether profits are turning into real cash in the bank.