Companies use the Direct Method or Indirect Method to prepare the Statement of Cash Flows which summarizes the following:
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Cash Flows from Operating Activities comprises cash receipts from customers and other sources less cash paid to vendors, employees, service providers and for taxes.
Cash Flows from Investing Activities comprises cash used to invest in the productive capacity of the company by way of purchases of property, plant and equipment and investment in long term investments and other companies. Also cash generated from the sales of property, plant and equipment and investments is taken into account.
Cash Flows from Financing Activities comprises cash generated from the issuance of common stock, preferred stock, and long-term debt less cash used to purchase treasury stock and pay dividends to shareholders.
The Net Addition (Deduction) to Cash during the year when added to the beginning cash balance should be equal to the ending cash balance.
