Cash flow statement shows the cash inflows and outflows of a business from three aspects: operating activities, investing activities and financial activities. The net cash flow from the operating activities is generally the total sum of the change of assets and liabilities for adjacent two years; therefore, the assets and liabilities influence the cash flow in a business. Furthermore, the increase of trade receivables will do harm to cash flow of companies because trade receivables are the money that customers pay on credit when purchasing a good from them, which means the customer owe the money. If the customers don’t pay the companies, they will not able to collect more money, and then results in the stumble of cash flow in business. The other assets like inventory, prepaid expenses perform the same way like trade receivables, they hurt the cash flow when there is a rise. In the contrast, depreciation will help the cash flow of a business if there is an increase in it. Depreciation is the item that subtracted from the non current assets, so it reduces the net book value of assets. In this case, it recovers the amount lost from the conversion of fixed assets to cash, and hence it is a positive factor in cash flow statement. The current liabilities work in same pattern like depreciation does.

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