Typically, when we talk about the three main financial statements, we refer to the income statement, balance sheet, and cash flow statement. Among these, we will first take a quick look at the cash flow statement.
The cash flow statement can be thought of as the company's ledger. It shows how much money the company earns and spends, based on the actual timing of when money is received and paid. If $100 is spent, it is marked as a negative, and if $100 is earned, it is marked as a positive. Although the cash flow statement is complex, what we are ultimately interested in is the final conclusion at the bottom.
On the right is Delta Airlines' cash flow statement for the past 3 years. If you look at the final conclusion, what do we see? Ultimately, the company has spent more money than it earned, regardless of the details. Now we might wonder, why did this happen? Let's dive a little deeper into the details to find out.
Let’s take a look starting from 2023. In 2023, Delta Airlines ended up with a result close to zero. They earned 6,500 from operations, used 3,150 for investment activities, and another 3,400 for financing activities. They probably used the funds to invest in new airplanes and airport facilities, and to pay down debt. How about 2022? The money earned from operations is similar, but this time they seemed to focus much more on investment and financing activities. As a result, they seem to have spent a lot of cash. In 2021, they earned only half the amount from operations. However, they were very conservative with investments. Financing activities seemed to be at a similar level as the previous years. Why was that? As you might have guessed, it’s likely because of the impact of the coronavirus in 2021.
Due to COVID-19, operations were sluggish, and because of the uncertainty, the company had no choice but to reduce investments for the future. However, they probably had no choice but to proceed with debt repayment according to plan. Then, in 2022, as operations started to normalize, they likely had to make the investments that they couldn’t make in 2021. Of course, this is just a hypothesis.
Anyway, through the cash flow statement, we can see how much cash a company has earned and spent. And since the actual cash flow statement is very long and includes various details in the notes to the financial statements, much more information can be obtained. But for now, we will stop here. Just remember that the cash flow statement records the three main activities of the company based on the inflow and outflow of cash.
