How to Use Cash Flow for Benefits of Investments
- 1). Obtain the cash flow statement. The cash flow statement is published by the company in its annual report. The annual report can usually be found on the company website or by contacting the investor relations department for the company.
- 2). Identify these line items on the cash flow statement: Cash Flow From Operations; Cash Flow From Investments; and Cash Flow From Financing. These are the only three sources of cash for a company. Cash Flow From Operations provides information on the sources and uses of cash flow generated from company operations and Cash Flow From Financing provides information about the sources and uses of cash flow obtained from investors and creditors. Cash Flow From Investments provides information about the sources and uses of funds obtained from investing in assets which are not a part of regular operations.
- 3). Determine if Cash Flow From Investments is negative or positive. A positive cash flow indicates that cash flow obtained from investments can be used for the benefit of operations or financing activities. Operational activities include activities like the purchase of inventory or the payment of expenses, such as rents or salaries. Financing activities include the cost of debt (interest) or dividend payments to stockholders.