Cash Flow Statement Example & How to Read It

A cash flow statement explains how a company's cash balance changed over a period. It groups every movement of cash into three sections — operating, investing, and financing — and the three section totals add up to the net change in cash. This post walks through one complete, consistent cash flow statement example and shows how to read each line. For the underlying concepts, see what is a cash flow statement.

The numbers below are rounded and illustrative. They are designed so the arithmetic ties out cleanly, which is exactly what a real statement must do.

The worked example

Imagine a small business, Maple Goods Co., for the year. It started the year with $15,000 in cash. Here is its cash flow statement.

Cash flow from operating activities

Line item	Amount
Net income	$50,000
Add: Depreciation	$8,000
Decrease in accounts receivable	$3,000
Increase in inventory	($5,000)
Increase in accounts payable	$4,000
Net cash from operating activities	$60,000

Cash flow from investing activities

Line item	Amount
Purchase of equipment	($30,000)
Proceeds from sale of land	$5,000
Net cash from investing activities	($25,000)

Cash flow from financing activities

Line item	Amount
Proceeds from bank loan	$20,000
Dividends paid	($10,000)
Net cash from financing activities	$10,000

Reconciliation

Line item	Amount
Net cash from operating activities	$60,000
Net cash from investing activities	($25,000)
Net cash from financing activities	$10,000
Net change in cash	$45,000
Beginning cash balance	$15,000
Ending cash balance	$60,000

The three section totals — $60,000, −$25,000, and $10,000 — sum to a net change of $45,000. Add that to the $15,000 the business started with, and you get the $60,000 it ended with. That tie-out is the whole point of the statement: every line should roll up into the change in cash.

How to read the operating section

The operating section starts with net income and adjusts it back to actual cash. This is called the indirect method, and it is the format most companies use. Net income comes from the income statement and includes non-cash items and timing differences, so it rarely equals the cash that actually moved through the bank account during the year. The adjustments below bridge that gap, line by line, from accounting profit to cash generated.

• Depreciation (+$8,000). Depreciation reduced net income but no cash left the business, so it is added back.
• Decrease in accounts receivable (+$3,000). The company collected more from customers than it booked in new sales, releasing $3,000 of cash. Falling receivables add cash.
• Increase in inventory (−$5,000). The company spent cash building up stock that has not sold yet, so this uses cash.
• Increase in accounts payable (+$4,000). The company delayed paying suppliers, holding onto $4,000 of cash a little longer. Rising payables add cash.

The pattern is consistent: add back non-cash expenses, and treat each change in working capital based on whether it freed up cash or tied it up. A useful rule of thumb is that when an asset like receivables or inventory goes up, cash goes down, and when a liability like payables goes up, cash goes up. Positive operating cash flow of $60,000 means the core business generated real cash, not just accounting profit. When net income is healthy but operating cash flow is weak, it is often a sign that cash is stuck in unpaid invoices or unsold inventory.

How to read the investing section

Investing activities cover buying and selling long-term assets.

• Purchase of equipment (−$30,000). Buying assets consumes cash, so it is negative.
• Proceeds from sale of land (+$5,000). Selling an asset brings cash in, so it is positive.

A net outflow here of $25,000 usually signals a company that is reinvesting — buying more than it sells. That is common and often healthy when the business is growing, since it is putting cash into the assets it needs to operate. A company that consistently sells off more assets than it buys, by contrast, may be raising cash to cover shortfalls elsewhere, so the direction of this section is worth reading in context.

How to read the financing section

Financing activities track cash exchanged with lenders and owners.

• Proceeds from bank loan (+$20,000). Borrowing brings cash in.
• Dividends paid (−$10,000). Returning cash to owners sends cash out.

The net inflow of $10,000 means the company raised more financing than it returned during the year. This section answers a simple question: did the business lean on outside money, or pay it back? Here the loan of $20,000 outweighed the $10,000 in dividends, so on balance the company brought in cash from financing.

Putting it together

Reading the statement as a whole tells a short story. Maple Goods Co. produced $60,000 of cash from operations, spent a net $25,000 buying assets, and took in a net $10,000 from financing. Cash grew by $45,000, ending at $60,000. A reader can quickly see the business funded its investments out of operating cash and still had room to spare.

When you check a statement like this, confirm two things:

1. The three section totals add up to the net change in cash.
2. Beginning cash plus the net change equals ending cash.

If either does not tie out, there is an error somewhere in the figures.

Building one from your own records

To prepare a cash flow statement, you need clean transaction data — typically your bank activity lined up by date and category. A quick way to get there is to pull your statements into a spreadsheet first. You can use the free bank statement converter to turn PDF statements into rows you can sort and total, then group those rows into operating, investing, and financing buckets.

For more background on the structure, definitions, and the indirect versus direct method, read what is a cash flow statement.