What Is a Cash Flow Statement?

What Is a Cash Flow Statement?

What Is a Cash Flow Statement

What Is a Cash Flow Statement?

If you are considering going into business for yourself there are several budgeting tools that you must familiarize yourself with. For example, you’ll need to understand the ins and outs of your budget and prepare a cash flow statement. Although if you are new to business, you might be asking yourself “what is a cash flow statement?” And why do I need one for my business?

A cash flow statement is one of the quarterly reports that publicly traded companies must disclose to the SEC. However even if your not a publicly traded company it’s a best practice to have and understand a cash flow statement. That’s because it’s a useful tool to understand the cash flow going into and out of your organization. It is also a useful tool to understand trends in business performance that are not always obvious on other financial statements. A cash flow statement typically includes the following three sections.

Operating activities.

This section of the statement shows all of the revenue generating activities of your business. For example, product sales, commissions and/or royalties can be seen in this section of the cash flow statement.

Investment activities.

This sections includes payments for long term investments such as land, production and equipment that relate to your business. Additionally if you receive income from selling any of the previously mentioned items, those funds would appear here as well.

Financing activities.

This is typically the last section of a cash flow report and provides an overview of cash used in business financing. Here you will find any activities that that could possibly alter the equity or borrowings of a business. Cash generated from capitol fundraising such as debt and/or equity is also found here.

If you have questions getting started with a cash flow statement for your business contact the pros at Potter & LaMarca today!

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