March 11, 2022 In Economic Feasibility Studies

Cash flow statement & liquidity

  • Where does the company get the money?
  • How efficient is the company in collecting its debts and paying its obligations?
  • Is the company still dependent on external financing, or has it begun to self-rely on its cash assets?
  • So most of all, is the company on the verge of bankruptcy? Or does it maintain good and sufficient cash flow statement?

These and other questions certainly matter to every investor, manager, auditor, supplier or customer of the company, and their answer is read between cash flow statement numbers:

The importance of cash flow statement:

Cash flow is the real lifeline for the company that will keep the company alive.

Cash flow is important for paying employees’ salaries, rents, taxes, supplier dues, machine purchases, loan repayments, bank interest and other obligations.

The company must therefore enhance its ability to inject liquidity appropriately, both from its main operational activities and through investment and financing activities.

What is the cash flow list?

It is one of the four most well-known financial reports, detailing the volume of cash flows entering and leaving the company during the financial period, providing a clearly defined picture of the integrity of the company’s financial activity.

The list of cash flows is detailed in cash sources and the like and ways in which they are spent on operating, investment and financing items. This is in addition to the balance between cash and semi-cash assets from the beginning to the end of the year.

What is the cash flow list different from profits and losses?

The income list gives a picture of the results of the company’s business from profit or loss during the financial period (in accordance with the principle of entitlement). The cash flow list details the sources of cash flow received by the company and the ways in which it is used.

More simply, the company usually gets cash and spends it in three main activities:

Operational Cash flow operational activity:

Includes receipts from customers (cash flow inside), payments to suppliers and operating cash company expenses, as well as repayment of interest on bank loans and bonds (out cash flow) during the financial period.

Investment Cash Flow:

Proceeds from the sale of long-term investment assets such as fixed assets (cash flow within) and payment for the purchase of these assets also (out cash flow) during the financial period .

Finance Cash Flow Finance Activity:

Receipts include external financing, capital increase (in cash flow) paid for dividends and bond repayments (out cash flow) during the financial period.

The results of the three monetary financial activities give indications of the company’s monetary position according to the following table:

Monetary activity Net activity negative Net activity positive
Operational activity. Operating activity does not cover the company’s liquidity requirement (negative indicator) Operating activity covers the company’s liquidity requirement (positive indicator)
Investment activity The company invests and expands its business. The company sells assets and shrinks its business.
Financing activity The company funds itself externally. The company pays its external obligations.

This means that a company that relies on liquidity from its operating activity is a company that manages cash efficiently and relies on its own resources without having to look for external sources of liquidity such as loans and external investments.


In the fourth quarter of 2021, Apple ended the year with excellent financial results, boosted by an increase in cash assets of $2,701 billion, compared to the third quarter, which achieved a liquidity decline of $3,860 billion. (Note: This cash flow list, prepared by indirect method.)

According to the following list, Apple’s three cash flow indicators were positive.

Operating activity has been positive, and the company is expanding its investment according to negative investment flow figures, and pays its external obligations according to the negative investment flow figures:

Period 4 Quarter 2021 3 Quarter 2021
Net income  (billions $ ) $34,630 $94,680
Cash flow from operating activity $46,966 $104,038
Cash flow from investment activity -$16,106 -$14,545
Cash flow from financing activity -$28,159 -$93,353
Net change in liquidity $2,701 -$3,860

Apple’s positive monetary results have strengthened its position at the forefront of the world’s most valuable companies, outperforming Microsoft, Google and even Amazon.

It remains to be remembered that the cash flow list is set up in one of two ways:

·    Direct Method Direct .

·    Indirect Method Indirect Method .

Although the methods of preparation vary by method, the results are the same in both ways.

The Income statement… a scale of business performance.