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The Complete Idiot's Guide to Stock Investing Fast-Track by Ken Little

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Statement of Cash Flows Tracks Cash In and Out

The statement of cash flows is the most important of the three financial statements, because it deals with how much cash came into the business and how much went out. The difference is cash left for reinvestment, dividends, and so on. How much cash a company generates after expenses is ultimately why you buy its stock. Companies that have a large and growing positive cash flow (more in than out) generate value for the shareholders. A company’s future cash flows (projections) help analysts set a value for the stock today, because a company is worth the discounted value of future cash flows. I discuss this in more detail in Chapter 6, but for now it is important to understand where those numbers come ...

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