What is a cash flow statement?
A cash flow statement (kassaflödesanalys) is included in larger companies' annual reports and shows how the company's cash changed over a period. It is divided into three parts: cash flow from operating activities, from investing and from financing. Unlike the income statement, it shows actual money, not accrued revenue and costs.
Why cash flow matters
A company can report a profit yet be short of cash, or the other way around. Cash flow shows whether the business generates money and how investments and financing affect liquidity. For unlisted growth companies, which often invest heavily, cash flow says a lot about how long the capital will last.
Cash flow and valuation
Future cash flows underpin a discounted cash flow (DCF) valuation, where a company's value is estimated as the present value of the cash flows it is expected to generate. DCF often complements a multiple-based valuation when assessing the value of an unlisted company.