Summer's Over—Get Smart on Cash Flow and Become a Very Serious Investor

In 1863, the Dowlais Iron Company had recovered from a business slump, but had no cash to invest for a new blast furnace, despite having made a profit. To explain why there were no funds to invest, the manager made a new financial statement that was called a comparison balance sheet, which showed that the company was holding too much inventory. This new financial statement was the genesis of [the] cash flow statement that is used today. In the United States in 1973, the Financial Accounting Standards Board (FASB) defined rules that made it mandatory under Generally Accepted Accounting Principles (US GAAP) to report sources and uses of funds, but the definition of "funds" was not clear. Net working capital might be cash or might be the difference between current assets and current liabilities. — The Cash Flow Statement, Wikipedia.

September is upon us. It's time to ask what matters. What matters?

Cash flow.

Believe it or not, cash flow is recent to the world of finance and investment and has been a work in progress for decades. Here is a nice summary to make your eyes glaze over. What is required is to understand there are three parts to the cash flowing through a company; there are two ways to measure said flow; and the partridge in the pear tree is that people you respect really care about cash flow. So, too, should you.