Most people want to be an investor
But most investors don’t know how to read a cash flow statement
Here’s how to read a cash flow statement:
The Cash Flow Statement shows how cash moves in and out of a company.
The cash flow statement is presented in the quarterly and annual company filings
The things I ask myself:
-Is operating cash flow positive or negative? (Positive)
-Is capital expenditures less than OCF? (Yes)
-Is the company buying back stock or issuing new shares? (Buying back)
These are 3 simple questions to ask yourself before reading one
Cash flow is divided into 3 sections:
-Cash from operating activities
-Cash from investing activities
-Cash from financing activities
These are the 3 main components of every cash flow statement.
1. Operating Activities
Cash flows from operating activities explains the cash flows within the business for its normal operations over a particular period.
This will show whether a company is capable of generating positive cash flow to maintain and grow its operations.