Cash flow statement

The cash flow statement (Kapitalflussrechnung) shows how a company's stock of liquid funds has changed over a period.

3 sections:

1. Cash flow from operating activities:

• Money from normal business operations
• Net income + depreciation ± change in current assets
• The most important cash flow – positive = the core business earns money

2. Cash flow from investing activities:

• Purchases/sales of assets, machinery, shareholdings
• Usually negative (that's good – the company is investing in growth)
• Positive e.g. when parts of the company are sold

3. Cash flow from financing activities:

• Taking out/repaying loans
• Share issues, share buybacks
• Dividend payments (negative)

Indirect method (standard in Germany):

• Starts with net income
• Adds back non-cash items (depreciation, provisions)
• Takes changes in working capital into account

Accounting standard:

• DRS 21: German Accounting Standard for the cash flow statement
• IAS 7: international standard (IFRS)
• Mandatory for all capital-market-oriented companies