---
id: "action-use-cashflow-statement"
type: "action-item"
source_timestamps: ["Reel 30"]
tags: ["fundamental-analysis", "accounting"]
related: ["concept-cashflow-vs-profit", "claim-profit-standard-not-actual", "prereq-financial-statements"]
speakers: ["Condel Bowen"]
outcome: "Reveals the true economic reality and cash-generating power of a business."
---
# Analyze the Statement of Cash Flows

## Action

Value stocks based on the **Statement of Cash Flows** rather than the Income Statement.

## Why

Stop using the Profit & Loss (Income) statement as your primary valuation tool. GAAP profit is an accounting standard — it recognizes revenue when *earned*, not when cash is received. The Statement of Cash Flows reveals:

- **Cash from Operations** — the actual cash generated by the business.
- **Cash from Investing** — capex, acquisitions.
- **Cash from Financing** — debt repayment, share buybacks, dividends.

Together, these show *how management actually deploys capital* — which is what determines long-run shareholder value. See [[concept-cashflow-vs-profit]] and [[claim-profit-standard-not-actual]].

## Outcome

Reveals the true economic reality and cash-generating power of a business.

## Prerequisites

[[prereq-financial-statements]].