How to Read a Cash Flow Statement

To read a cash flow statement, it helps to know its three main sections:

1. Operating Activities
   • Shows cash generated from day-to-day operations.
   • Includes revenues (grants, taxes, fees) and expenses (payroll, utilities, supplies).
   • Positive cash flow here indicates healthy core operations.
2. Investing Activities
   • Reflects cash used for or generated from long-term assets.
   • Includes capital projects, equipment purchases, or proceeds from asset sales.
   • Negative numbers here aren’t always bad, they may simply reflect investments in growth.
3. Financing Activities
   • Captures cash from borrowing and repayments.
   • Includes bond issuances, loan proceeds, principal payments, and interest.
   • Shows how an organization funds operations and projects beyond normal revenues.
     
     

How to Interpret the Results 

• Look for positive cash flow from operations as this shows sustainability.
• Compare investing and financing activities to understand how projects are being funded.
• Watch the net change in cash at the bottom; it shows whether cash balances increased or decreased during the period.
• Consider the timing of inflows and outflows: seasonality or delayed funding can create short-term gaps even if overall cash flow is positive.