What is cash flow?

Profit against cash at Eli Lilly

Cash from operations is the money the day-to-day business produced. Capital spending is what the company paid for things like plants and equipment. Free cash flow is the difference: what is left for dividends, loans or anything else.

Why profit and cash differ

Depreciation. As the EBITDA lesson shows, depreciation is a cost in profit, but no money leaves the company that year.

Invoices. A sale counts as revenue when it is made, even if the customer pays later.

Inventory. Goods in the warehouse are paid for, but they become a cost in profit only when they are sold.

Advance payments. Customers may pay early, so the cash arrives before the revenue.

Together, invoices, inventory and advance payments are called working capital. For Eli Lilly in 2025, the change was −$8.1 billion.

So cash from operations was smaller than profit that year.

In 2023 profit was $5.2 billion and free cash flow −$3.2 billion. A company can make a profit and still spend more than it takes in.

What it tells you

A single year says little. A company that is expanding can have weak free cash flow with nothing wrong, and one that cuts its investment can look strong for a while. What is worth looking at is the pattern over several years.

Profit rests on many judgments about when revenue and costs are booked. Cash is easier to check. So it is worth a closer look if profit is much higher than cash flow year after year.

Companies sometimes use their own names for cash flow measures, calculated in different ways. The table uses the lines from the cash flow statement. How to read the whole statement, part by part, is in the lesson on the cash flow statement.

More numbers are on the Eli Lilly stock page.