Here’s how I tell my students to remember the Statement of Cash Flows. It’s not comprehensive, but usually allows them to get to the right answer.
Start off by realizing that there are three ways to get cash - earn it (operations), hock your stuff (investments) (or the reverse counterpart - buy stuff), or borrow it (financing).
I. Let’s start with operating activities:
Net Income - profits from operations
Since Depreciation is a non-cash expense, Net Income doesn’t reflect cash - it’s decreased by Depreciation expense. So, add it back.
Likewise, if we have a non-cash gain, subtract it
Then, we look at all the operating activities that also aren’t reflected in Net Income. These are Current Asset and Current Liability changes other than (1) cash, and (2) Notes Payables (this is a financing activity) or the Current Portion of Long-term Debt (this is a financing activity)
To remember what’s what, I think in terms of inventory - if you buy inventory (an asset), it costs you cash. So, asset increases are cash outlays, and decreases are inflows. Likewise, if an asset increase is a decrease in cash, a liability increase (like Accounts payables) is an increase, and a Liability decrease is a decrease.
II. Next, on to Investing activities
These are changes in long-term (i.e. Fixed) assets. Just like with inventory, and increase is an outflow, and a decrease is an inflow. Just remember - use Gross Fixed Assets, not Net Fixed Assets (NFA includes the effects of Depreciation).
III. Finally, to Financing Activities
These include any cash paid out to or received from long-term debt or equity holders. We’ve already taken care of interest expense in the calculation of Net Income. So, it’s either Dividends Paid, New issues of Debt or Equity (i.e. the changes in these accounts), or Decreases in Debt or Equity. And don’t forget that Debt included here includes Notes Payables and the Current Portion of Long-term Debt.
If you’ve done it right, the sum of these three - Operating, Investing, FInancing - will give you the change in cash.