Cash Flow Statements
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Cash flow statements, or statements of cash flow, measure the flow of cash into and out of a company for a particular time period.

This time period corresponds to the time period of the income statement and has the same ending date as the balance sheet statement.

It measures the cash flow of three different company activities ...

• operating activities section measures the cash flow that went into and out of the company from day-to-day activities of the business
• investing activities section measures the cash flow generated from the purchases and sales of assets, investment in plant and equipment and other line items These are the capital expenditures or capex
• financial activities section measures the activity of cash to finance the company operations, including payment of dividends, proceeds from share issues, and proceeds of borrowings and repayment of borrowings

Free cashflow can also be derived by subtracting 'capex per share' from 'cash flow per share'.

Free cash flow tells you how much cash actually flows to the bottom line.

Discounted cash flow analysis (DCF) is valuation method used to estimate the attractiveness of an investment opportunity.

The DCF analysis uses future free cash flow projections and discounts them, commmonly using the weighted average cost of capital, to arrive at a present value, which is used to evaluate the potential for investment.

If the intrinsic value per share of the company arrived at through DCF analysis is higher than the current share price, the opportunity may be a good one.

There are a number of discounted cash flow models available, some of which attempt to simplify the calculation. See the discussion in the stock fair value section.

Cash flow is the life blood of any business.

Return from Cash Flow Statements to Financial Statements