Cash flow statement

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A cash flow statement is a financial report that shows incoming and outgoing money during a particular period (often monthly or quarterly). It does not include non-cash items such as depreciation. This makes it useful for determining the short-term viability of a company, particularly its ability to pay bills.

People and groups interested in cash flow statements include:

Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses
Potential lenders/creditors, who want a clear picture of a company's ability to repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will be able to afford compensation

Cash flow statements are particularly important for start-up companies with limited liquid assets. These companies are vulnerable to devastating cash shortages, even when Accounts Receivable balances point to long-term financial health.

Statement of Cash Flows

(A) Cash Flow Info & Decision Making: ÃÂÃÂCash is KingÃÂÃÂ

(B) Statement of Cash Flows

 Statement of Cash Flow for the period 1/1/xx to 1/1/xx+1

 Cash flow from operations (CFO)      +/-  x x

 Cash flow from investing (CFI)       +/-  y y

 Cash flow from financing (CFF)       +/-  z z

 Equals change in cash account      = change of cash balance

 + Beginning of period cash         + Beginning cash

 = Ending cash balance              = Ending cash

  1. non-cash items

  2. depreciation

  3. deferred tax

  4. interest amortization

5. accrual items, such as wages payable

(D) Methods for preparing SCFs

  1. Direct Method

  2. Indirect Method