Cash flow statement

The Cash Flow Statement, or Statement of Cash Flows, summarizes a company’s inflow and outflow of cash. Where a business’s money come from (cash receipts) and where it went (cash paid). By “cash” we mean both physical currency and money in a checking account. This is a standard financial statement used along with the balance sheet and income statement. The statement usually breaks down the cash flow into three categories including OperatingInvesting and Financing activities. A simplified and less formal statement might only show cash in and cash out along with the beginning and ending cash certainly not very reliable.

How to do Cash flow analysis?

To perform a cash flow analysis, you can compare the cash flow statement over multiple months or years. You can also use the cash flow analysis to prepare an estimate or plan for future cash flows. This is important because cash flow is about timing. Make sure you have money on hand when you need it to pay expenses, buy inventory and other expenses.

A cash flow analysis is not the same as the business budget or profit and loss projection which are based on the Income Statement. However, for a small uncomplicated business operating mainly with cash instead of credit accounts, there may seem to be little difference.

Free Cash flow excel template

However cash flow statement was designed for the small-business owner looking for an example of how to format a statement of cash flows. The categories can be customized to suit your company’s needs. If you don’t want to separate the “cash receipts from” and the “cash paid for” you can delete the rows containing those labels and reorder the cash flow item.

The spreadsheet contains two worksheets for year-to-year and month-to-month cash flow analysis or cash flow projections.

Cash Flow Statement Essentials

What is Operating Activities?

Operating activities make up the day-to-day business, like selling products, purchasing inventory, paying wages, and paying operating expenses. Perhaps the most important line of the cash flow statement is the Net Cash Flow from OperationsThis section of the statement basically deals with the Current Assets and Current Liabilities sections of the Balance Sheet. It also includes Revenue and Expenses section of the Income Statement.

What is Investing Activities?

Investing activities include buying and selling assets like property and equipment, lending money to others and collecting the principal, and buying/selling investment securities. This section of the statement usually deals with the Long-Term Assets section of the balance sheet.

What is Financing Activities?

Financing activities include borrowing from creditors and repaying loans, issuing and repurchasing stock, and collecting money from owners/investors, and payment of cash dividends. This section of the statement includes the Long-Term Liabilities and Owners’/Stockholders’ Equity from the Balance Sheet.