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    Cash Flow Statement

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    JonathanKelly Bitonga Bargaso
    Cash flow refers to the movement of cash into and out of a business. Maintaining positive cash flow is important for paying expenses and surviving as a small business. While profitability reflects money earned, cash flow considers actual cash on hand, which may differ from profits if invoices are unpaid. The statement of cash flows categorizes a company's cash sources and uses into operating, investing, and financing activities to reconcile beginning and ending cash balances.

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    Cash Flow Statement

    Uploaded by

    JonathanKelly Bitonga Bargaso
    23 views11 pages
    Cash flow refers to the movement of cash into and out of a business. Maintaining positive cash flow is important for paying expenses and surviving as a small business. While profitability reflects money earned, cash flow considers actual cash on hand, which may differ from profits if invoices are unpaid. The statement of cash flows categorizes a company's cash sources and uses into operating, investing, and financing activities to reconcile beginning and ending cash balances.

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    Cash flow refers to the movement of cash into and out of a business. Maintaining positive cash flow is important for paying expenses and surviving as a small business. While profitability reflects money earned, cash flow considers actual cash on hand, which may differ from profits if invoices are unpaid. The statement of cash flows categorizes a company's cash sources and uses into operating, investing, and financing activities to reconcile beginning and ending cash balances.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    23 views11 pages

    Cash Flow Statement

    Uploaded by

    JonathanKelly Bitonga Bargaso
    Cash flow refers to the movement of cash into and out of a business. Maintaining positive cash flow is important for paying expenses and surviving as a small business. While profitability reflects money earned, cash flow considers actual cash on hand, which may differ from profits if invoices are unpaid. The statement of cash flows categorizes a company's cash sources and uses into operating, investing, and financing activities to reconcile beginning and ending cash balances.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    CASH FLOW

    STATEMENT
    What is Cash Flow?

    ■ Cash flow is defined as the movement of cash in (or out) of your business. A cash
    inflow means that money is going into your business, during events such as receiving
    payment from customers or taking on a bank loan to fund your business.
    ■ On the other hand, cash outflow occurs when money is moving out of your business,
    such as when you invest in equipment essential to your business, or when you buy
    product inventory from your suppliers.
    Why is Managing My Business Cash
    Flow Important?
    ■ Managing and maintaining a positive cash flow ensures that you have enough money to
    pay for monthly expenses, such as your store’s rental and utility bills. This is crucial,
    especially for newly founded small businesses that rely heavily on the availability of
    cash to survive.
    Isn’t Being Profitable Enough to
    Ensure Success?
    ■ Cash flow only takes into account cash on hand, and not accounts receivables and
    accounts payable. It is not uncommon for businesses to run on credit terms where sales
    are recorded when the invoice is issued, increasing your accounts receivable for the
    customer. This, in turn, is reflected in your income statement as profit gained, even
    when you have not received any payment.
    ■ Therefore, profitable businesses with large amounts of uncollected payment tied in their
    accounts receivable may suffer from excessive cash outflows. When left unchecked, this
    may result in having to take up additional bank loans or overdrafts to maintain business
    operations and output.
    10 useful tips to improve your small
    business cash flow
    1. Send out invoices asap
    2. Lease equipment instead of buying
    3. Form a purchasing cooperative
    4. Use electronic payment methods
    5. Streamline your work processes
    6. Forecast sales
    7. Explore how price elastic your customers are
    8. Implement a deposit system
    9. Offer a variety of payment methods
    10. Consider invoice factoring
    What is the statement of cash flows?

    ■ Operating cash flow + Investing cash flow + financing cash flow = Cash on hand
    ■ There are three components of this formula:
    – Operating cash flow
    It is defined as the movement of cash that contributes to the main costs associated
    with operations of the business, such as the purchase and sales of products and
    services. Employees' salaries and wages are also included in operating activities.

    One of the signs of a bustling business is a high positive operating cash flow.
    What is the statement of cash flows?

    ■ Operating cash flow + Investing cash flow + financing cash flow = Cash on hand
    ■ There are three components of this formula:
    – Investing cash flow
    Cash movements that contribute to the purchase or sale of long-term assets such as
    property, equipment, and office supplies fall under investing activities.

    Investing cash flow usually sums up to a negative value, symbolizing that the
    company is investing in more assets to grow the business. However, a positive
    value can occur when the company sells off obsolete long-term assets.
    What is the statement of cash flows?

    ■ Operating cash flow + Investing cash flow + financing cash flow = Cash on hand
    ■ There are three components of this formula:
    – Financing cash flow
    Financing activities are activities involving a change in the business’s equity capital and any
    debts. These include the borrowing or pay off of bank loans, investor payouts, and issuing or
    buyback of company shares.

    Financing cash inflows are the result of taking bank loans and investor capital to invest back into
    the business while financing cash outflows can be due to the paying off of bank loans and
    stockholders.
    By adding these values under the three categories, you can view the total net cash movement of
    the business for the period indicated.

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