The Operating Activities section reports cash inflows and outflows that stem directly from a company’s main business activities. These activities include buying from suppliers and selling to customers as well as other revenue and expenses reported in the income statement.

The income statement is more frequently prepared using the accrual basis of accounting.

The revenues reported may not have been collected or turned into cash. Similarly, the expenses reported in the income statement may not have been paid.

The Operating Activities section converts the income statement into the cash basis of accounting by excluding non-cashflow items and accounting for changes in working capital (excluding cash).

The cash flows from operations section begins with net income, then reconciles all non-cash items such as depreciation and provisions, to cash items involving operational activities.

So, in other words, it is the company’s net income, but in a cash format.

The Investment Activities section of the cash flow statement identifies Investment gains and losses as the name would suggest.

This section also includes cash spent on fixed assets such as property, plant, and equipment.

This section is where analysts look to find changes in capital expenditures (capex).

When capex increases, it generally means there is a reduction in cash flow, which is not always a bad thing, as it may indicate that a company is investing in its future operations.

Companies with high capex tend to be those that are growing.

The Investment Activities section identifies cash flow from investments by deriving the net movement of Fixed Assets, Loans Issued, investments and securities from one fixed date to another.

The Financing Activities section of the cash flow statement provides an overview of cash used in business financing.

It measures cash flow between a company and its owners and its creditors, and its source of cashflow is normally from debt or equity.

Analysts use the Financing Activities section to determine how much money the company has paid out via dividends or share buybacks.

It is also useful to help determine how a company raises cash for operational growth.

Cash obtained or paid back from capital fundraising efforts, such as equity or debt, is listed here, as are loans taken out or paid back.