Reading a cash flow statement in ten minutes

A cash flow statement has three parts: operating, investing and financing. Read them as a story of where money came from and where it went.

Operating cash flow tells you whether the core business converts profit into cash. Over a five-year window, cumulative operating cash flow should broadly track cumulative net profit. A widening gap is a question, not automatically a verdict.

Investing cash flow is usually negative for a growing business because it is buying assets. Financing cash flow shows debt raised or repaid and dividends paid.

A pattern worth learning to spot: rising profits, weak operating cash flow and rising borrowings. That combination has historically preceded stress at many companies and is exactly the kind of thing ratios alone hide.