Cash Flow

Statement

What is a
Cash Flow Statement?

and what is it used for?

Simply put, a cash flow

statement is the
movement of money in
and out of your business.

A cash flow statement can

answer the questions:
Where did the money come from?
and
Where did it go?

The primary purpose is to

provide information
regarding a companys cash

receipts and cash payments

It can be used to assess

the timing, amount and
predictability of future
cash flow.

How is the Cash Flow Statement

Different from The Other
Financial Statements?

The Cash Flow Statement

complements the income
statement and Balance Sheet.

It is designed to convert the

accrual basis of accounting
used in the income statement
and balance sheet back to a
cash basis.

While the income

statement tells you if
you are making a
profit or a loss and
by how much.

The Balance Sheet

tells you what you
own, what you owe
and who youve gotten
money from.

They are both prepared

on accrual basis.

The Cash Flow statement is the one

financial statement prepared strictly on a
cash basis and lets you know how much
liquid cash your company is making.

What Makes Up a
Cash Flow Statement?

Part 1:
Operating Activities

Operating activities in cash

flow arise from normal
business operations such
as revenues and cash
operating
expenses after taxes.

Operating activities that create

cash outflows include payments
by suppliers, payment to
employees, interest payments,
and payment of income taxes.

Cash inflow (+)

Payment for services rendered
Payment from customers
Cash outflow (-)
Payments to suppliers
Payments to employees
Payments to government
Payments to lenders
Payments for other expenses

Part

:2

Investing activities

Investing activities
involve buying and
selling of current and
fixed assets.

Cash inflow (+)

Sale of property, plant and equipment
Sale of debt or equity securities (other
entities)
Collection of principal on loans to other
entities
Cash outflow (-)
Purchase of property, plant and
equipment
Purchase of debt or equity securities
(other entities)
Lending to other entities

Part 3:
Financing Activities

Financing activities include

borrowing and repaying
money, issuing stock
(equity) and paying
dividends

For example: If you borrow funds to

purchase equipment or pay off a loan,
the cash flow statement will enable
you to determine how much cash was
either generated or used as
a result of those transactions

How to Prepare a
Cash Flow Statement

1. There will be a starting balance of

cash at the beginning of each period
2. You will have increases or decreases
in cash via operations; the company
made or lost money on the core
business
3. The company will use cash
throughout the year to pay for things
i.e. new assets
4. Some companies may choose to raise
additional cash throughout the year

Cash Flows from Operating Activities

Cash Flows from Investing Activities

Cash Flows from Financing Activities

Increase OR Decrease in Cash (Ending)

Beginning Cash Balance

Ending Cash Balance

You
Thank