Cash Flow Analysis Paper

The lack of a cash cushion is one primary reason small businesses fail; therefore for small businesses, it is important to understand and manage the company 's cash cycle (Byrd, 2012). The cash flow statement records the amounts of cash and cash equivalents entering and leaving a company, and includes three components by which cash enters and leaves a company: core operations, investing, and financing (Heakal, 2010).

It is very important as this is the money that comes in from sales that then goes towards wages, bills and purchasing further stock. However important statements such as the statement of financial performance or profit or loss ( the income statement) and the balance sheet, do not always contain the information needed to monitor cash flow.

The cash flow statement of a company showcases how much money coming in to the business and out of business. A positive cash flow indicates a health business where more money coming in to business than going out of the business. There are three major component of cash flow statement which are operations, investing and financing activities. The balance sheet represents the financial position of the company for a specific date and provide company asset, liabilities and owner equity. The Income statement demonstrates how a company use its assets to generate income over a period of time. It explains the how the company generate revenue and what are their

Separately, the balance sheet reports a company’s financial position while the income statement reports a company’s fiscal year profits and losses. The balance sheet measures a company’s financial position by reporting its assets, liabilities, and owner’s (shareholder’s) equity. The income statement measures a company’s financial performance by reporting its revenues, expenses, and net income/loss. When combined, they serve two vital purposes: (1) expand the accounting equation and (2) enable analysis using ratios to determine industry position or potential material misstatements. The increase or decrease in owner’s (shareholder’s) equity on the balance sheet is a direct result of the net

Cash flow can be used as an indication of a company 's financial strength by the comparability of the inflows and the outflows cash flows are essential to solvency. The statement presents a record of something that has happened in the past, such as the sale of a particular product, or forecasted into the future, representing what DJS expects to take in and to spend. Cash flow is crucial to an entity 's survival.

The statement of cash flows is a relatively new statement. Focused on cash-basis accounting rather than accrual-basis, the purpose of this statement is to describe the effects of a company’s cash inflows and outflows. This paper will discuss the current standards for the statement of cash flows, the history of the statement, and if the direct method or indirect method is more advantageous for the users.

Cash flow investing is a type of investing where you receive cash distributions from your investment at regular intervals. The distributions can come monthly, quarterly, semiannually or annually. The money comes from the purchase of an asset that can be leased or generates income in some other way. When the source of investing is real estate, the cash flow comes from rent payments. It can be from a multi-unit building or from a single tenant building. Once all of the rent is collected and all of the expenses are paid, some of the remaining money can be kept in reserve, the rest can be used for investment purposes. Although cash flow investing is a great strategy, it is not without its risks. You must fully understand the process and the possible outcomes before you jump into it.

The cash flow statement detects the cash that is flowing in and out of the company. Generating more cash on a consistency empowers the company to increase its dividend, reduce debt, buy back some stock, or even acquire another business. It must be noted that without the proper amount of cash on hand, the potential of long term success could possibly lead a company into bankruptcy. Reporting the company’s net income and then converting from the accrual basis of the cash basis by using the changes in the balances of current asset and current liability accounts, such as: Accounts receivable, inventory, supplies, prepaid insurance, other current assets, notes payable, wages payable, payroll taxes payable, interest payable, income taxes payable unearned revenues, and other current liabilities. The operating activities have adjustments for depreciation expense and for the gains and losses on the sale of long-term

Analysis and timing of cash and cash equivalents directly impacts the organization’s financial position. Cash flow projections should be a continual process, which helps to determine whether or not the organization has enough liquid assets to create cash in a crisis situation. “The key to any group is that cash flow be accurately recorded and that the report be scrutinized often to uncover trends and changed that might need immediate attention” (Matan & Hartnett,

1. What does this statement of cash flow tell you about the sources and uses of the company? The cash flow statement gives me a view between the balance sheet and income statement. The main sources of income come from the regular sales and the sales of stock.

The Statement of Cash Flow provides information about cash receipts and cash payments of a business at a specific period of time. It provides an idea of the company’s cash position, which includes the net increase and decrease, inflows and outflows of cash through three major components: operating activities, investing activities, and financing activities over an accounting period. The operating activities include the cash effects of transactions that create revenues and expenses. It helps determine net income for that year. The investing activities include the sales and purchases of the company. It also includes the lending of money and the collecting of loans. The financing activities section shows how cash was obtained from issuing debt and repaying the amounts borrowed and obtaining cash from stockholders, repurchasing shares and paying dividends. Therefore, the three components show where the cash came from, how and

A cash flow statement “represents a compilation of all operating, investing, and financing activities that cause a change in cash” (Wainwright, 2012). The cash flow statement is primarily used to get an idea of what the company’s total financing and investing activities look like. First,

The statement of cash flows was applied by the FASB in 1987 to allow the managers to know more about cash flows information. Because the income statement and the balance sheet are based on the accrual biases. So, this statement is based on the cash biases; and it illustrates all the inflows and the outflows of the cash during the period of reporting; and its main purpose to show the causes of the change in cash from the

      The Statement of Cash flows is a very useful financial statement that can benefit investors, managers and even auditors. The statement of cash flows has not been around as long as the other financial statements such as the balance sheet or income statement. It basically “illustrates the way accounting evolves to meet the requirements of users of financial statements.” (Marshall, 2003) The statement of cash flows is designed to provide important information about the cash that a company has received or has paid out during a certain time period. It provides a reason for the changes of cash received and paid by a company by taking into

Financial statements, also known as financial reports, record the financial activities of a business in short and long term. The four financial statements are: balance sheet, income statement, statement of retained earnings, and statement of cash flows. A balance sheet reports the assets, liabilities, and net equity on a company. An income statement reports income, expenses, and profits on a company. A statement of retained earnings shows a company 's changed retained earnings. The statement of cash flows shows a company 's cash flow activities, such as operating investing, and financing activities (“Financial statements”, 2007, para.1). Financial statements are very important to a company.