ABSTRACT
The cash flow statement of the firm utilizes the information from the income statement and balance sheet to determine how much cash the firm has generated by its operations and financing activities, how cash has been allocated during a set period. The statement of cash flows is divided into five components: the operational cash flow; investment in working capital; investment in fixed assets; the financing cash outflow; and the financing cash inflow. The operational cash flow is the net cash flow before taxes which is obtained from the company’s activities without taking into account investments in working capital and tangible fixed assets. The operational cash flow is equal to the company’s profit corrected for costs that are not cash outflows, i.e. the non-cash entries. When the enterprise grows, inventories will grow as well, just like the balance sheet items accounts receivable and accounts payable. Working capital is equal to the difference between the current assets and current liabilities.
