Corporate Finance For Dummies, 2nd Edition

Chapter 6

Going with the (Cash) Flow

IN THIS CHAPTER

Identifying what makes up the statement of cash flows

Combining operations for more information

Putting the statement of cash flows to good use

Money is used to fund a variety of different things: paying for basic operations, making investments, issuing debt, and so on. Determining whether these activities that use a company’s money generate positive or negative value is crucial to understanding whether a company is using its money wisely.

In this chapter, I discuss the statement of cash flows, the financial record that tells all about the movement of cash into a company (inflows) and out of a company (outflows), and the reasons why these cash flows occur.

Moving Along Three Smooth Flows

Cash and cash equivalents hold a special place in the hearts of managers, investors, and lenders. Even the love stories of old are rarely able to portray the dedication and devotion that some people have for cash. No wonder companies write their own love poems about cash (and the way they use it) in the form of financial statements called statements of cash flows. Having assets and value is good, but it’s all meaningless unless you can turn ...