A cash flow statement can be thought of as having three constituent parts. The first is the starting point of Net [[Income]] and the removal of non-cash items therefrom. The second part concerns the overall operating aspects of the business and their impact on cash. The final is the effect of long term financing and investing decisions such as the issue of [[capital]], [[debt]], repayment of debt, [[dividend]]s and capital expenditure.<ref>A certain amount of capital is expended or used up over time. This is called [[depreciation]] in the U.S. Tax Code. Capital expenditure is not to be confused with budgeting for capital investment, sometimes called capital expense.</ref>
Operating cash flow shows the cash flow that the business generated, or used, in the day -to -day operations of its business. Key factors in generating operating cash flow are the control of [[accounts receivable]] and inventory levels. If the operating cash flow<ref>typically overhead, [[payroll]], inventory replenishment, debt service, [[tax]]es etc.</ref> of a business is significantly different from its accounting income, the reason should be investigated. While there are many legitimate reasons for the two to diverge, this simple test can often lead to the discovery of inappropriate [[accounting]].
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[[Category:Business]]
[[Category:Accounting]]