Cash Flow

Cash Flow Statement

A table splitting the cash that actually came in and out into operating, investing, and financing — where you check whether book profit is real cash.

In plain terms

The cash flow statement is a "bank transaction record." The income statement's profit is a number computed under accounting rules and can differ from the bank balance, but the cash flow statement counts only the cash that actually moved.

It splits into three boxes — ① operating (cash earned from the core business), ② investing (cash from buying and selling factories, equipment, stakes), ③ financing (cash from taking on and repaying debt, or going out as dividends and buybacks). Seeing these three shows at a glance "where cash came in and where it went out."

What it tells you

It shows whether the profit a company earns comes in as real cash, and where that cash is spent (investment, debt repayment, shareholder returns).

What really matters is the "authenticity" of profit. Profit is easy to inflate, but the cash in the bank is hard to fake — so when operating cash flow diverges from net income for long, question the quality of the earnings.

Formula

operating cash flow (cash the core business earned)
+ investing cash flow (capex, buying/selling stakes)
+ financing cash flow (borrowing, repaying, dividends, buybacks)
= change in cash for the period

What high or low means

When operating cash flow is steadily larger than or similar to net income, it is read as healthy — the earnings coming in as real cash.

If profit is reported but operating cash is negative, or the shortfall is repeatedly filled with debt (financing) or asset sales (investing), it is a signal to look harder.

Caution

Do not read just "cash went up." It may be cash raised not from the core business (operating) but by borrowing (financing) or selling assets (investing). You have to split the three streams to see whether the source of that cash is healthy.

Subtracting capital expenditure (CapEx) from operating cash gives the free cash flow (FCF) truly free to use. Operating cash can look good, but if capex swallows it all, nothing is actually left.

When working capital like receivables and inventory rises, that much cash is tied up and operating cash flow falls. Conversely, paying suppliers late can temporarily make cash look good.

Metrics to read alongside

OCF (Operating Cash Flow)

Operating cash flow (OCF) is the heart of the cash flow statement. As the real cash the core business earned, it is the first number for judging earnings quality.

FCF (Free Cash Flow)

Subtracting capex (CapEx) from operating cash gives free cash flow (FCF). It shows how much cash on the cash flow statement is "truly free to use."

Income Statement

Reading the income statement's "profit" next to the cash flow statement's "cash" lets you check whether that profit is real money reaching the bank.

CapEx (Capital Expenditure)

A large part of investing cash is capex. It is worth reading together how much the company spends on its future and how much of operating cash that swallows.

See it in real stocks

Search US stocks on Stocklore to see Cash and other financial metrics alongside the sector average.

BIDU Baidu, Inc.MCO Moody's Corporation HOOD Robinhood Markets, Inc.ASML ASML Holding N.V.REGN Regeneron Pharmaceuticals Inc WDAY Workday, Inc.Search stocks →

Exactly how Stocklore computes this metric (formula, thresholds, SEC source) is on the methodology page.

This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.