Cash Flow Statement (CFS) FAQs What are the implications of positive and negative cash flows? Positive cash flow reveals that more cash is coming into the company than going out. This is a good sign as it tells that the company is able to pay off its debts and obligations. Negative cash flow typically shows that more cash is leaving the company than coming in, which can be a reason for concern as the company may not be able to meet its financial obligations in the future. However, this could also mean that a company is investing or expanding which requires it to spend some of its funds. What is the difference between direct and indirect cash flow statements? Direct cash flow statements show the actual cash inflows and outflows from each operating, investing, and financing activity. While the indirect cash flow method makes adjustments on net income to account for accrual transactions. What is the importance of cash flow statements? Cash flow statements are important as they provide critical information about the cash inflows and outflows of the company. This information is important in making crucial decisions about spending, investments, and credit. What are the main components of a cash flow statement? The main components of a cash flow statement are cash flows from operating activities, investing activities, and financing activities. How are cash flow and free cash flow different? Cash flow is the total amount of cash that is flowing in and out of the company. Free cash flow is the available cash after subtracting capital expenditures. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.