Financial Intelligence, Revised Edition: A Manager's Guide to Knowing What the Numbers Really Mean

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The Language of Cash Flow

You’d think a cash flow statement would be easy to read. Since cash is real money, there are no assumptions and estimates incorporated in the numbers. Cash coming in is a positive number, cash going out is a negative one, and net cash is simply the sum of the two. In fact, though, we find that most nonfinancial managers (and even some financial folks, as we’ve learned in working with many finance departments) take a while to understand a cash flow statement. One reason is that the labels on the statement’s categories can be confusing. A second reason is that the positives and the negatives aren’t always clear. (A typical line item might say, “(increase)/decrease in accounts receivable,” followed by a positive or a ...