Part 3: [Cash Flow Statement] Tracking a Company's 'Real Cash Movement' ~True Soundness Seen Through the Blood Circulation of Yamazaki Baking~

Have you ever heard the news that 'a company that should have been making a huge profit with black-ink management suddenly went bankrupt one day'?

'If they are making a solid profit and have plenty of assets, why would they go under?'

Many of you have likely felt bewildered by such a mysterious phenomenon, as if you were bewitched by a fox. Since you are diligently researching corporate performance to buy stocks, you definitely want to avoid a situation where you lose a fortune by being deceived by such numerical tricks. Many beginner investors are captivated only by the glamour of the 'apparent profit' written on the Income Statement (P/L), invest without noticing the dangerous signs that cash has completely dried up from the company's wallet, and as a result, end up getting caught in a 'bankruptcy while in the black' and losing their assets, leading to deep regret.

The weapon essential for 100% avoiding such terrifying traps is the 'Cash Flow Statement (C/F)' that I will introduce this time.

This is, so to speak, like an ultrasound scan that reveals the 'vivid blood flow of cash' circulating through a company's body.

Once you can read this Cash Flow Statement, the 'true inflow and outflow of money' of a company will become as clear as if you were holding it in your hands. No matter how much the profit on the books is decorated, by checking the undeniable fact of cash movement, you will be able to make investment decisions with firm confidence, saying, 'This company is making real cash in its core business, so it is absolutely safe.' This is the greatest benefit for seeing through market traps and protecting your real assets.

This time, too, let's unravel the difficult world of accounting while comparing it to real-life wallet situations, clearly and with me, mako!

Basics of the Cash Flow Statement (C/F): The Cash Cycle Captured Through 3 Blood Flows

'Profit is an opinion, cash is a fact' The absolute truth that professional investors rely on in the end

In the world of accounting, there is a famous maxim that many successful fund managers and professional accountants recite like a bible: 'Profit is an opinion, cash is a fact.' The 'profit' recorded on the Income Statement has room for some control (opinion) depending on the choice of accounting rules, but the amount of 'cash' in the safe or bank account at this very moment is a 'cold, hard fact' that absolutely cannot be faked.

General individual investors tend to be captivated only by flashy sales and profit growth, and only a handful of people check the Cash Flow Statement in detail. That is precisely why, just by being able to understand this cash circulation system, you can acquire an extremely 'high-scarcity skill' that allows you to filter companies from the exact same perspective as a professional.

Let's compare the 3 cash flows to 'personal wallet situations'

The Cash Flow Statement has '3 rivers (categories)' prepared according to the use of money. Let's organize these intuitively by comparing them to our personal lives and pocket money cycles.

• ① Cash Flow from Operating Activities (Operating CF): 'Raw cash' earned from the core business

  • Shows how much cash a company actually acquired through its core business.

  • Metaphor: This is the 'real take-home pay' that is actually deposited into your account from your company after you work hard at your job (core business) every month. Having this firmly in the positive is an absolute condition for a healthy company.

• ② Cash Flow from Investing Activities (Investing CF): 'Sowing seeds' for the future

  • The inflow and outflow of cash when building factories, buying new machinery, or buying stocks of other companies to earn more in the future.

  • Metaphor: This is your 'self-investment expenditure' such as attending an English conversation school or buying a new computer for your future career advancement. Therefore, for companies that are growing vigorously, this is usually a 'negative (cash expenditure)'.

• ③ Cash Flow from Financing Activities (Financing CF): 'Adjustment of excess or deficiency' of money

  • The movement of cash when borrowing money from a bank (positive), or conversely, repaying debt or paying dividends to shareholders (negative).

  • Metaphor: It is like an adjustment valve for your wallet, such as 'I had some extra money so I paid off my student loan or car loan in a lump sum (negative)' or 'I was in a pinch this month so I borrowed money from my parents (positive)'.

By looking at the flow of these 3 rivers in combination, the management stage that the company is currently in emerges with surprising vividness.

[Practical Analysis] Thoroughly check the 'blood flow of cash' of Yamazaki Baking!

Now, let's enjoy the real thrill of corporate analysis using actual financial results data. This time, too, we will perform surgery on the Cash Flow Statement of the absolute ace of the Japanese dining table, 'Yamazaki Baking Co., Ltd.' (Fiscal Year Ending December 2025 Financial Results Summary).

What kind of circulation is the 'blood flow of money' flowing inside Yamazaki Baking planning? I will unravel that vivid movement of cash with data.

Summary of Consolidated Cash Flows for the Fiscal Year Ended December 2025

This is the table that covers the full picture of the increase and decrease in cash for the current consolidated fiscal year announced by Yamazaki Baking.

*The increase/decrease of '+911 million yen' in cash flow from financing activities means that expenditures (negative) have decreased compared to the previous period.

Just by taking a quick look at this table, you can see that a wonderful 'golden balance' has been established. The shape of cash flow that professional investors find most ideal is the pattern of 'Operating CF significantly positive, Investing CF negative, and Financing CF negative,' and Yamazaki Baking is drawing this classic shape perfectly.

Operating CF: The 'Ultimate Cash Machine' that sucks up cash from all over Japan every day

First, what is staggering is that cash flow from operating activities recorded a massive surplus of 78.87 billion yen. The amount of cash generated has increased by approximately 4.9 billion yen from the 73.9 billion yen of the previous period.

This means that due to the 'fusion of price increases and new technology' we learned about in the previous two sessions, flagship breads and Japanese/Western confectionery are selling like hotcakes, and the proceeds are literally flowing back into Yamazaki Baking's accounts every day from cash registers at supermarkets and convenience stores across Japan like a 'tsunami of cash.' By adding back 43.6 billion yen in 'depreciation expenses,' which do not actually involve cash outflows, to the 61.5 billion yen in profit before income taxes, this thick mountain of cash is being created solely through the core business. In terms of blood, it is proof that a very powerful, smooth, and healthy blood flow is circulating throughout the entire body.

Investing CF: A 55.8 billion yen deficit is a 'super-aggressive investment' in future deliciousness

Next, cash flow from investing activities is a deficit (expenditure) of 55.859 billion yen. This is an increase in investment expenditure of 12.3 billion yen compared to the previous period.

One might tend to think, 'Is it bad that expenditures are increasing?' but in the manufacturing industry, a negative Investing CF is an expression of an extremely positive 'offensive stance.' Looking at the breakdown, 50.7 billion yen in cash is being poured into expenditures for the acquisition of tangible fixed assets (mainly for state-of-the-art bread factories, automation of production lines, and labor-saving investments).

Since they are allocating 55.8 billion yen out of the 78.8 billion yen generated by the core Operating CF to 'capital investment' to enhance future competitiveness, they are continuing to sow the seeds of future growth entirely 'within the scope of their own earnings' without relying on bank debt. This super-aggressive investment stance within a healthy range is the ultimate source of peace of mind for long-term investors.

Financing CF: A 'beautiful exit' of paying off debt with earned money and responding sincerely to shareholders

Finally, cash flow from financing activities is a deficit (expenditure) of 14.126 billion yen. This is the result of using the remaining cash earned from the core business to repay debt and provide returns to shareholders.

Looking at the specific use of cash, 12 billion yen was allocated to the repayment of long-term loans, 3.6 billion yen was spent on the acquisition of treasury stock (the act of buying back the company's own shares from the market to increase share value), and 8.922 billion yen in cash was firmly paid out as dividends to us shareholders.

They earn cash solidly through their core business (Operating CF: positive), invest in factories for future growth (Investing CF: negative), and because there is still cash left over, they pay off debt and thank shareholders (Financing CF: negative).

As a result, the final balance in their wallet (cash and cash equivalents at the end of the period) has increased beautifully by another 9.4 billion yen, from 145.9 billion yen at the end of the previous period to 155.4 billion yen. When shown such a beautiful, clear, and perfect circulation of cash, professional investors have no choice but to admit that 'the financial soundness of this company is the real deal.'

Summary of today's learning and stepping up

Three key points for today

1. The Cash Flow Statement (C/F) tracks the 'truth of cash that cannot lie'

   • To avoid being deceived by book profits (P/L), checking the actual, realistic inflow and outflow of cash (blood flow) is the only way to avoid bankruptcy while profitable.

2. Yamazaki Baking has an ideal 'positive-negative-negative' golden cycle

   • They earn cash intensely through their core business (Operating CF), invest in future infrastructure within the scope of self-sufficiency (Investing CF), and use the remaining money to both repay debt and return value to shareholders (Financing CF).

3. With a cash balance of 155.4 billion yen on hand, the company's survival capability is at an invincible level

   • Because they consistently maintain a plentiful cash position, they possess an absolute buffer that allows them to respond quickly and flexibly even if sudden economic shocks or further spikes in raw material costs occur.

Baby steps you can take starting today

For you who have learned the importance of the 'blood flow' of cash this time, I am delivering an extremely easy action plan.

It is to 'check the difference in the real balance of your own bank account between the end of last month and the end of this month'.

Try looking at your own wallet from a cash flow perspective: 'Did I cover my self-investment (investment CF) and credit card repayments (financing CF) within the range of my company salary (operating CF) this month, and did my final deposit balance increase?' The sense of being conscious of this 'flow' of money is the best training to cultivate the 'cash-oriented thinking' that ensures you will never fail in investing.

Next time preview: [Profitability Analysis] Mastering ROE and ROA to understand the true meaning of 'earning efficiency'

You have finally acquired the basic puzzle of the three financial statements: a company's 'offense (P/L)', 'defense (B/S)', and 'blood flow (C/F)'. This is wonderful progress!

However, this is where the 'applied course' begins. For example, if there were two companies making the same '1 billion yen profit', and one earned it efficiently with '1 billion yen in capital' while the other took its time using a massive '100 billion yen' to finally earn it, it is obvious which one you should invest in, right?

Therefore, in the next session, the 4th installment, we will thoroughly dissect the super-important indicators that investors love most: 'ROE (Return on Equity)'and'ROA (Return on Assets)'. By knowing the true meaning of a company's 'earning efficiency', I will teach you the secret to instantly identifying 'truly excellent efficient companies' whose stock prices could multiply many times over. Please look forward to the next lecture!

mako's comprehensive investment judgment (10-point scale)

Rating: 9 / 10

[Reason] Through this cash flow analysis, the reliability of Yamazaki Baking has been elevated to a solid level. With operating CF at an extremely high level of 78.8 billion yen, they covered 55.8 billion yen in capital investment (investment CF) and 14.1 billion yen in financial payments (dividends/debt repayment) entirely on their own, while also increasing their cash on hand by a net 9.4 billion yen—this is a perfect financial cycle with no room for complaint. Since it has been proven that the risk of 'having profits but no cash' is completely zero, I have added even more peace of mind to the previous evaluation and am giving it the highest rating of '9' out of 10. It is a flawless, sound company at a level that can be safely passed down to family over the long term.

(Source: Yamazaki Baking Co., Ltd. Financial Results for the Fiscal Year Ending December 2025)

Disclaimer

This article was created by AI for the purpose of providing information and investment education based on publicly available information such as the provided financial results, and it does not solicit or recommend the purchase or sale of any specific stocks. Please ensure that you make final investment decisions based on your own judgment and responsibility. Furthermore, the figures and forecasts posted are as of the time of creation and do not guarantee future cash flow or investment results.