Day 3- Cash Flow

11 May

It’s all about the Benjamin’s! This is going to be a real quick post. Heading to Boston on a jet plane very shortly. Cash flow statements are useful, or so I am finding out, to adjust for the quirky accrual accounting system. You may be showing a profit on your income statement, but that speaks nothing to today’s liquidity and to your ability to meet current debts. The cash flow statement is a measurement of cash coming into and out of your business for a given interval of time. It excludes non cash items like depreciation, write offs, or bad debt to name a few and is often used as a barometer for a firms ability to meet near term obligations.

The three main categories on a cash flow statement are operational, financing, and investing.

  1. Operational are things associated with the production and sale of a company’s product and collecting customer payments
  2. Financing deals with the inflow of money from investors such as banks and shareholders as well as outflows to shareholders in the form of dividends as the company generates profits
  3. Investments are the purchase and sale of assets, loans made to suppliers or received from customers, payments related to merger and acquisitions.

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