How do i determine quality of a company's cash flow?

Question

i have the figures from a company's statement of cash flow, but i need a better understanding how to determine if the figures are favorable or not

Answer 1

First, it's good to have a positive cash flow, at least in general.  An occasional shortage that's either explainable and expected is a large reason to seek interim financing.  In addition to the positive numbers, you should take a look at their assets in comparison to their liabilities, particularly their current assets; e.g., cash, ar, wip, fin. goods, prepaid expenses,etc.  Even if they have a positive cash flow, there are reasons to be a bit cautious; e.g., the cash flow is from deposits on sales, they received some other financing, the owners piped in some of their money, etc.