What is a Cash Flow Statement? 
A cash flow statement details a company's cash inflows and outflows from operations, investments, and financing over a period. It measures how well a company generates cash to pay its debt, fund its operations, and support its growth.

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1. Segments Breakdown 

A) Operating Activities 
- Cash Inflows: Include net income, changes in working capital, and non-cash adjustments. 
- Cash Outflows: Include payments to suppliers, salaries, and operating expenses. 

Formula: 
Operating Cash Flow = Net Income + Non-Cash Charges + Δ in Working Capital 

Example (Cable Factory): 
- Net Income = $100,000 
- Non-Cash Charges (Depreciation) = $10,000 
- Change in Working Capital = +$5,000 

→ Operating Cash Flow = 100,000 + 10,000 + 5,000 = $115,000 

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B) Investing Activities 
- Cash Inflows: Include the sale of property, plant, and equipment (PPE) or investments. 
- Cash Outflows: Include purchases of new equipment, buildings, and R&D costs. 

Formula: 
Investing Cash Flow = Proceeds from Sale of Investments – Capex – Acquisitions 

Example (Cable Factory): 
- Proceeds from Equipment Sale = $5,000 
- Capital Expenditures (Capex) = $20,000 
- Acquisition Cost = $0 

→ Investing Cash Flow = 5,000 – 20,000 – 0 = -$15,000 

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C) Financing Activities 
- Cash Inflows: Include issuing new debt or equity. 
- Cash Outflows: Include paying dividends, repaying debt, or repurchasing stock. 

Formula: 
Financing Cash Flow = + Proceeds from Debt/Equity – Debt Repayment – Dividends – Stock Repurchase 

Example (Cable Factory): 
- Proceeds from Debt Issuance = $50,000 
- Debt Repayment = $10,000 
- Dividend Payment = $5,000 
- Stock Repurchase = $2,000 

→ Financing Cash Flow = 50,000 – 10,000 – 5,000 – 2,000 = $33,000 

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D) Total Cash Flow Calculation 
Formula: 
Net Cash Flow = Operating Cash Flow + Investing Cash Flow + Financing Cash Flow 

Example (Cable Factory): 
- Operating Cash Flow = $115,000 
- Investing Cash Flow = -$15,000 
- Financing Cash Flow = $33,000 

→ Net Cash Flow = 115,000 + (-15,000) + 33,000 = $133,000 

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E) Cash at Beginning and End of Period 
Formula: 
Ending Cash = Beginning Cash + Net Cash Flow 

Example: 
- Beginning Cash = $50,000 
- Net Cash Flow = $133,000 

→ Ending Cash = 50,000 + 133,000 = $183,000 

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2. Cash Flow Ratios 

A) Liquidity 
1. Operating Cash Flow Ratio 
Formula: 
Operating Cash Flow Ratio = Operating Cash Flow / Current Liabilities 

Example: 
- Operating Cash Flow = $115,000 
- Current Liabilities = $50,000 

→ Operating Cash Flow Ratio = 115,000 ÷ 50,000 = 2.3 

2. Cash Ratio 
Formula: 
Cash Ratio = Cash Balance / Current Liabilities 

Example: 
- Cash Balance = $183,000 
- Current Liabilities = $50,000 

→ Cash Ratio = 183,000 ÷ 50,000 = 3.66 

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B) Valuation 
1. Cash Flow Yield 
Formula: 
Cash Flow Yield = Operating Cash Flow / Market Cap 

Example: 
- Operating Cash Flow = $115,000 
- Market Cap = $500,000 

→ Cash Flow Yield = 115,000 ÷ 500,000 = 23% 

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C) Cash Conversion 
1. Free Cash Flow Conversion 
Formula: 
Free Cash Flow Conversion = Free Cash Flow / Net Income 

Example: 
- Free Cash Flow = $95,000 (Operating Cash Flow – Capex) 
- Net Income = $100,000 

→ Free Cash Flow Conversion = 95,000 ÷ 100,000 = 95% 

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3. Summary Example (Cable Factory) 

Category	Amount ($)
Operating Cash Flow	115,000
Investing Cash Flow	-15,000
Financing Cash Flow	33,000
Net Cash Flow	133,000
Beginning Cash	50,000
Ending Cash	183,000
Operating Cash Flow Ratio	2.3
Cash Ratio	3.66
Cash Flow Yield	23%
Free Cash Flow Conversion	95%

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Practical Insight: 
- A positive Operating Cash Flow indicates the business is generating enough cash from operations. 
- A negative Investing Cash Flow means the business is actively investing in growth. 
- A positive Financing Cash Flow shows the company is raising funds, but consistent negative financing cash flow due to dividend payments can strain liquidity. 
- High Cash Flow Ratios suggest strong liquidity and financial health.