Cash flow analysis
Compare operating cash generation with investing outflows, debt repayments and financing sources, and investigate changes over time. Interpret the amounts alongside the statement of financial position, profit or loss and business context. A healthy cash balance alone does not guarantee sustainable operations, and a period of negative investing cash flow can reflect productive investment. IAS 7 classification is subject to the version applicable to the reporting or exam period.
Worked example
An entity generates $200,000 operating cash, spends $150,000 on equipment and repays $30,000 debt. Before other movements, cash increases by $20,000. The analyst asks whether operating cash can sustain future investment and repayments.
Common mistake
Treating profit as identical to cash generated or assuming every investing outflow is a sign of poor performance.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |