How to Read Cash Flow

The profit you can actually bank.

Profit on the P&L can include sales not yet paid for. The cash flow statement strips that away and shows actual cash moving in and out. A company can report profit yet run short of cash, which is why this statement matters. Operating cash flow Cash from the core business. Most important, want it positive and growing. Investing cash flow Cash spent on or from assets. Often negative for growing firms. Financing cash flow Cash to/from lenders and shareholders (loans, repayments, dividends). A firm reports Rs 210 net profit but only Rs 120 operating cash flow. The gap means much profit is tied up in unpaid sales, worth understanding why. Over time, operating cash flow should broadly track net profit. If profit rises but cash doesn't, ask why. Reveals real, spendable cash Exposes paper profit Operating cash is hard to fake Single years swing on timing Read alongside the P&L Investing outflows aren't always bad

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: The Statements.