cash flow statement

Also called: statement of cash flows

The report of cash in and out over a period, split into operating, investing and financing flows. It links the P&L to the change in the bank balance.

The cash flow statement shows where a company's cash came from and where it went during a period. It sorts every movement into three sections. Operating: running the business (customers paying, providers, salaries, suppliers). Investing: buying or selling things that serve for years, such as equipment or an in-house platform. Financing: money from lenders and owners, and paying it back.

Most companies build the operating section backwards, from profit (the indirect method). Start with profit, add back costs that moved no cash in the period, such as depreciation, then adjust for balances that grew or shrank. Deferred revenue up: cash arrived ahead of revenue, add it. Receivables up: revenue arrived ahead of cash, subtract. Payables up: costs arrived ahead of payment, add.

It is the bridge between the other two statements: opening cash + operating + investing + financing = closing cash on the balance sheet. Read it to see whether profit turns into cash, how much the company invests and who funds the gap: customers, lenders or the owners.

Example

Klasna's school year, 1 September 2025 to 31 August 2026 (June to August forecast), in UAH:

	UAH
Operating profit	744,174.72
− Decrease in prepaid lessons (deferred revenue)	−1,086,661
+ Provider's fees already paid on those lessons	27,166.53
Operating cash flow	−315,319.75
Investing: laptops	−432,000
Financing	0
Net cash flow	−747,319.75
Cash on 1 September 2025	600,000
Cash on 31 August 2026	−147,319.75

Over the year families used 1,086,661 more lessons than they paid for, and the 2.5% fee on that money had been paid a year earlier, so 2.5% × 1,086,661 = 27,166.53 comes back. A year with 744,174.72 of operating profit ends below zero: the P&L alone would never show it.

Common mistakes

Skipping it because the P&L looks fine. Profit and cash can move in opposite directions for a whole year.
Reading depreciation as a source of cash. It is added back because it never used cash in the period, not because it creates any.
Mixing the sections. Equipment belongs in investing and loans in financing; putting them in operating hides how the business itself performs.
Reading one period without the season. A prepaid business looks strong in spring and weak in summer every year.

Learn it in the course

The cash flow statement and the three financial statements · How the three financial statements link, with a cash flow statement example: operating, investing and financing cash, built from profit with the indirect method.
Case: a board report for a new board member · A board report on the quarter: rebuild Klasna's autumn P&L from raw lines, separate what will repeat from what won't, and back the memo with numbers.
Profit is not cash: net income vs cash flow · Net income vs cash flow, month by month: how accruals, prepayments, invoices and equipment make the P&L and the bank disagree, and how to get from one to the other.