Know you were is your Cash gone Audited Financials Statements.

You must know where is your Cash gone Audited Financials Statements.

The Shareholders are always in concern with the investment made.  Concern  point is will the shareholder get returns from the investment they made. The shareholder will still need the return on their investments made. So they wanted to know were is Cash going in the Company. The shareholder wanted to know the answer which places my money is going if I invest in this business will the company will return my investment is the company is capable and had enough cash to give return to the shareholders.

So the solution is to read the Audited Financials statements before investing in the company.

I will tell you How the read the Financials Statements particularly Cash flow Statement in the Audited Financial Statements and to understand and make to decide whether to invest in this company or not invest in this company.

Mainly the Statement is divided into three parts

  1. a) Operating Activity
  2. b) Investing
  3. c) Financing Activity.

Below the Tips which will help you to decide for Investment.

1)    Operating Activity – Working cash generation capacity.

Whenever you look at the cash flow, you need first to understand that whether the company can generate cash for period in which the financials are made.  If the cash generation closing balance is positive, it means that the company can produce money in Operations. This also says that the company can raise invoice that able to collect the money from the customers and pay the vendors there is no case where the company finds that there is a deficit in paying to vendors. The company is not facing the challenge in payment to the Statutory dues and capacity to pay if he purchases any goods or purchases any services the company will be able to pay the vendors.


If you are joining this company as a vendor/ employee then positive total in cash flow statement in  ‘schedule of Audited financials’ means that the company will pay your dues in time and you will get your money when you deal with this company.

2)    Cash generated from investing activity

When you read the Cash flow statement, some company are more in investment than making in operation. They generate cash from investment and not create some money from Trading or services income.  The investment may be for the future growth of the company for sometimes the company is making massive Cash in Fixed Assets.  Paying huge cash in accruing fixed assets means that a company is planning to make the cash generation in future not looking currently to save some money. A company may expect to invest in some other company or mutual funds from some other companies.


The positive cash inflow in investment activity means If you are thinking for a long term investment in the company then go the investment. As this company will give return afterward once they generate cash from their Fixed Assets and Investment.  Also, need to understand one thing that too much Cash outflow in the investment activity will lead to an issue in getting your return on investment back from this company who invest a lot and had negative cash from operating activity.

3)    Cash generated from Financing activity

The company gets finance from two placing one is from Equity infusion and Secondly from the borrowings. Cash received and made from issuing shares or any other type of similar securities. Money earned from issuing debentures, bonds, and any additional long terms borrowing.

If you see that in Cash flow statement that the company is generated cash from the Investing activity then it means that Company is planning to expand his business geographical wise, product wise and customer wise.


The positive cash in Cash flow statement from Financing activity means that you should also make the investment and others are making in this company. The Infusion of Capital or borrowing is done if Banks or Shareholders find this company can pay back your dues.

Final Conclusion

Before investing your painful Cash in the Company read the Audited Cash flow statements and understand the intention of the company for future paying capacity. This will make your investment safe and also will help you to decide to invest in a long term or short term investment.

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