What is a cash flow statement? | Brian Feroldi posted on the topic | LinkedIn (2024)

Cash Flow Statement 101What is a cash flow statement?It's a financial statement that tracks the flow of cash in and out of a company over a specific period, typically a fiscal quarter or year.A cash flow statement provides insights into how cash is generated and used within the business.CASH FLOW FROM OPERATIONS + CASH FLOW FROM INVESTING + CASH FLOW FROM FINANCING = NET CASH FLOWThe cash generated from core business activities plus cash from investing and financing activities equals the company's net cash flow.CASH FLOW FROM OPERATIONSCash generated or used in the day-to-day operations of the business, including sales, operating expenses, and taxes.CASH FLOW FROM INVESTINGCash related to the purchase or sale of long-term assets, such as property, equipment, or investments.CASH FLOW FROM FINANCINGCash transactions related to borrowing, repaying loans, issuing or buying back shares, and paying dividends.NET CASH FLOWThe final result represents the net increase or decrease in cash during the specified period.Why is it important?- Assesses the company's liquidity and ability to meet short-term obligations.- Reveals cash flow patterns and financial health.- Helps with financial planning and investment decisions.- Provides insights into the sources of cash and its allocation.The real value of a cash flow statement is in its regular use and analysis. It assists businesses in managing cash effectively, planning for future expenses, and maintaining financial stability.

📊The Statement Of Cash Flows :Cash flows are the pulse of a company, representing the movement of money in and out. It's not just about revenue; it's about liquidity, the ability to meet short-term obligations, and fueling day-to-day operations.

2

Please follow this page for more quick tips:The quickest way to check the financials of a company is to review its key financial ratios and statements. Here's a simple process:Financial StatementsLook for the company's latest financial statements, including the income statement, balance sheet, and cash flow statement. These are usually available on the company's official website in the "Investor Relations" section.Revenue and Net Income:Check the revenue and net income figures. Increasing revenue and positive net income are generally positive indicators.Profitability Ratios:Examine key profitability ratios such as the gross profit margin, operating margin, and net profit margin. These ratios provide insights into the company's efficiency and profitability.Liquidity Ratios:Evaluate liquidity ratios like the current ratio and quick ratio to assess the company's short-term financial health.Debt Levels:Check the company's debt levels by looking at the debt-to-equity ratio. Lower debt levels are generally preferable.Dividends and Dividend Yield:If you are interested in dividends, check if the company pays dividends and the dividend yield.Earnings Per Share (EPS):Look at the company's earnings per share, as it provides information on the company's profitability on a per-share basis.Price-to-Earnings (P/E) Ratio:Check the P/E ratio to evaluate the company's valuation compared to its earnings.While this provides a quick overview, it's important to note that a more in-depth analysis is usually advisable before making investment decisions. Consider factors such as the industry, competitive landscape, management team, and any recent news or events that might impact the company's performance. If you're new to investing, consulting with a financial advisor or doing further research is recommended.

10

How the Statement of Cash Flows connects to the Profit & Loss and Balance SheetUnderstanding the connection between these 2 statements will make a huge difference in your companies financial reporting.Let’s get into it:➡️ What is the Statement of Cash Flows?The Statement of Cash Flows is designed to tell you one thing..Where your cash is movingIt’s separated by:1️⃣ Cash from Operating activities → cash movements from operating your business2️⃣ Cash from Investing Activities → cash movements from the assets you’ve invested in3️⃣ Cash from Financing Activities → cash movements from the debt or equity to finance the business➡️ How do you prepare a Statement of Cash Flows?2 methods:1️⃣ The Direct Method → this is really easy to understandIt shows you information like Cash received from Customers…Cash paid to Employees…Cash paid to vendors etc.But at the same time, it’s really tough to produce2️⃣ The Indirect method → this is really easy to produce, but not as intuitive to understandIt shows you your Net Income from your P&L…Followed by the add back of your Depreciation & Amortization…and then the net change in each Balance Sheet Account.The Indirect Method is the most commonly used method, given how easy it is to produceAll you need is your Profit & Loss and Balance Sheet➡️ How does the indirect method pull from the Profit & loss and Balance Sheet?1️⃣ Cash from Operating ActivitiesThis PULLs from the Profit & Loss via Net Income, Depreciation & Amortizationand PULLS from your change in current assets (last period - this period)…and current liabilities (this period - last period)2️⃣ Cash from Investing ActivitiesThis PULLS from your Balance Sheet by taking the change in your fixed, intangible, and long term assets (last month - this month)3️⃣ Cash from Financing ActivitiesThis PULLS from your Balance Sheet by taking the movements in your debt accounts, and equity accounts other than retained earnings (this month - last month)And there you have it - how the Statement of Cash Flows works…Got anything to add? let us know in the comments below 👇PS: Looking for some help?The best way to control your cash flows is to keep track of it, and plan for the future.We can build you a cash flows model in as little as 2 weeks that will rock your socks 🧦 Learn more here 👉 https://bit.ly/48YXBxl

246

5 Comments

Unlocking the Power of the Cash Flow Statement: Key Points for Financial AnalysisAs financial professionals, we know that understanding a company's cash flow is paramount to assessing its financial health and making informed decisions. Among the trio of financial statements, the cash flow statement plays a pivotal role. Here are some key points to consider when analyzing a cash flow statement:1️⃣ Operating Cash Flow (OCF): This section reveals the cash generated or used by a company's core operations. It reflects the ability to generate consistent cash from day-to-day business activities, a vital indicator of a company's operational strength.2️⃣ Investing Cash Flow (ICF): Investing activities encompass the purchase or sale of long-term assets, such as property, equipment, or investments. Analyzing ICF helps evaluate a company's strategic investment decisions and potential for growth.3️⃣ Financing Cash Flow (FCF): Financing activities involve raising capital through debt or equity, as well as dividend payments or share buybacks. Understanding FCF provides insights into a company's capital structure, financial obligations, and shareholder distributions.4️⃣ Net Cash Flow: This figure represents the net increase or decrease in cash and cash equivalents during a specific period. It helps gauge the overall cash position of the company and its ability to meet financial obligations.5️⃣ Cash Flow from Operations (CFO): CFO reflects the cash flow generated or used from the company's day-to-day operations. It considers non-cash items like depreciation and amortization, providing a more accurate picture of cash generation.6️⃣ Cash Flow from Investing (CFI): CFI highlights the cash flow associated with investment activities, such as acquiring or selling assets. Positive CFI indicates investments generating cash, while negative CFI may indicate divestment or capital expenditure.7️⃣ Cash Flow from Financing (CFF): CFF showcases the cash flow resulting from financing activities, including issuing or repurchasing stock, raising or repaying debt, or paying dividends. It provides insights into the company's funding structure and financial decisions.By analyzing the cash flow statement, financial professionals can gain a comprehensive understanding of a company's cash inflows and outflows. This knowledge enables us to evaluate liquidity, solvency, and operational efficiency, supporting strategic decision-making and ensuring financial stability. Let's unlock the power of the cash flow statement together! #accounting #bookkeeping #FinancialAnalysis #CashFlowStatement #BusinessInsights

1

Check out this article about knowing the basics about Cash Flow Analysis.https://lnkd.in/gZXbeR3WIf you have any questions,Call Us: 843-509-7466or Email Us: info@tldbookkeepingandtax.com

1 Comment

A cash flow statement is a financial statement that provides a summary of the cash inflows and outflows of a company or an individual over a specific period of time. It is one of the three main financial statements used for financial analysis, alongside the income statement and the balance sheet. The cash flow statement helps assess the liquidity and financial health of an entity by showing how cash is generated and used during a given period.The cash flow statement typically covers three main categories of cash flows:1. Operating Activities: This section includes cash flows from the primary business activities of the company, such as revenue from sales and payments to suppliers and employees. It also accounts for interest and taxes paid or received.2. Investing Activities: This section shows cash flows related to the acquisition or disposal of long-term assets and investments. Examples include the purchase or sale of property, plant, equipment, and marketable securities.3. Financing Activities: This section reflects cash flows from activities that affect the capital structure of the company. It includes cash raised from issuing or repurchasing stock and the borrowing or repayment of loans.The cash flow statement is crucial because it provides insights into how a company generates and uses its cash resources over time. It allows investors, creditors, and other stakeholders to evaluate a company's ability to generate cash, its solvency, and its capacity to fund future investments and pay dividends.By comparing the cash flow statement with the income statement and balance sheet, analysts can gain a comprehensive understanding of a company's financial performance and position. This information aids decision-making and helps assess the company's ability to meet its financial obligations and pursue growth opportunities.

what is cash flow statement and funds flow statement ?A cash flow statement and a funds flow statement are both financial statements that provide information about the movement of money within a business. However, they differ in terms of the focus and purpose of the information they present.1. Cash Flow Statement:A cash flow statement is a financial statement that shows the inflows and outflows of cash and cash equivalents during a specific period. It provides insights into how cash is generated and used by a company. The statement is divided into three main sections:a. Operating Activities: This section includes cash flows from the company's core operations, such as sales and purchases, payment of salaries, and collection of receivables.b. Investing Activities: This section includes cash flows related to the purchase or sale of long-term assets, such as property, plant, and equipment, as well as investments in other companies or securities.c. Financing Activities: This section includes cash flows related to the company's financing activities, such as issuing or repurchasing shares, borrowing or repaying loans, and paying dividends.The cash flow statement helps assess a company's ability to generate cash, its liquidity position, and its ability to meet its financial obligations.2. Funds Flow Statement:A funds flow statement is a financial statement that provides information about the changes in a company's working capital during a specific period. It focuses on the movement of funds (both cash and non-cash) within a company. The statement is divided into two main sections:a. Sources of Funds: This section shows the inflow of funds into the company, such as proceeds from the issuance of shares, long-term borrowings, or sale of assets.b. Uses of Funds: This section shows the outflow of funds from the company, such as repayment of long-term loans, purchase of assets, or payment of dividends.The funds flow statement helps analyze the changes in a company's financial structure, its ability to generate internal funds, and its investment and financing decisions.In summary, while both statements provide insights into a company's financial activities, the cash flow statement focuses on cash movements, while the funds flow statement focuses on changes in working capital and overall financial structure.Follow Yashika Sharma for more such posts!

47

3 Comments

Cash flow statement:---As a business owner or financial professional, it's important to understand the cash flow statement. The cash flow statement is a financial statement that shows how much cash a company has generated or used during a specific period of time.The cash flow statement is divided into three sections: operating activities, investing activities, and financing activities. The operating activities section shows the cash inflows and outflows from the company's core business operations, such as sales and expenses. The investing activities section shows the cash inflows and outflows from investments in assets such as property, plant, and equipment. The financing activities section shows the cash inflows and outflows from financing activities such as loans, stock issuances, and dividends.The cash flow statement is an important tool for understanding a company's cash position. It can show whether a company is generating enough cash from its operations to cover its expenses and investments, or whether it needs to rely on external financing. It can also reveal trends over time, such as whether a company's cash position is improving or deteriorating.It's important to note that the cash flow statement is different from the income statement and balance sheet. The income statement shows a company's revenue and expenses over a specific period of time, while the balance sheet shows a company's assets, liabilities, and equity at a specific point in time. The cash flow statement complements these other financial statements by showing how cash is moving in and out of the company.In summary, the cash flow statement is a key financial statement that can help businesses and financial professionals understand a company's cash position and make informed financial decisions. Understanding how to read and analyze the cash flow statement is an important skill for anyone involved in finance or accounting. #business #finance

7