Cash flow — Excel guide
Profit is an opinion; cash is a fact. The cash flow statement reconciles the two and sorts every dollar into operating, investing, or financing.
The three sections
Where each kind of cash movement lives.
| Section | Contains |
|---|---|
| Operating | The core business: collections, payroll, suppliers |
| Investing | Buying/selling long-term assets, acquisitions |
| Financing | Debt raised/repaid, stock issued, dividends |
The indirect method walk
Start at net income and undo the non-cash pieces: add back depreciation, then adjust for working capital — an INCREASE in receivables SUBTRACTS (sales not yet collected), an increase in payables ADDS (bills not yet paid).
Profitable but broke
Income statement says profit while customers pay slowly and suppliers demand cash — the working-capital timing gap. The cash flow statement is where that story becomes visible.
Free cash flow
Operating cash flow − capital expenditures: the cash the business throws off after maintaining itself. Not a GAAP line, but the number valuation lives on.