The Cash Flow Statement

Why cash matters more than accounting profit, the three sections of the cash flow statement, how to calculate free cash flow, and the warning signs to watch.

Profit is not cash

A company can report a profit and still run out of money. Accounting rules record revenue when it is earned, not when the cash arrives, and spread big purchases over years instead of recording them when paid. The cash flow statement strips that away and shows the actual cash that came in and went out during the period.

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