how a cash flow statement is organized
as stated above a cash flow statement is divided into three main parts operations investing and financing these break down as follows 3the first section of the cash flow statement covers cash flows from operating activities cfo and includes transactions from all operational business activities the cfo section begins with net income then reconciles all noncash items to cash items involving operational activities in other words it is the company s net income but in a cash version this section reports cash inflows and outflows that stem directly from a company s main business activities these activities may include buying and selling inventory and supplies and paying employee salaries any other forms of inflows and outflows such as investments debts and dividends are not included companies must be able to generate sufficient positive cash flow for operational growth if not enough is generated they may need to secure financing for external growth to expand for example accounts receivable is a noncash account if accounts receivable go up during a period it means sales are up but no cash was received at the time of sale the cash flow statement deducts these receivables from net income because they are not cash the cfo section can also include accounts payable debts that are incurred but not yet paid depreciation amortization and numerous prepaid items that are booked as revenue or expenses but have no associated cash flow this is the second section of the cash flow statement it looks at cash flows from investing cfi and is the result of investment gains and losses it also includes cash spent on property plants and equipment it is where analysts look to find changes in capital expenditures 