Oil Spill

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The Role of Cash in a Business
Crucial Lesson Taught to People in Taking First Aid
Always check first if a victim is breathing, and if not, deal with that first.

Statement of Cash Flow

There have been instances where people have tended to bleeding wounds, only to find that the victim died from, say, a blocked air passage.
Many things are essential to life, but in the short term, nothing is more important than breathing, in that an absence creates the most immediate life threatening "crisis".
Cash as Breath of a Business
Anyone running a business should think of cash as breath.
Cash, in a broad sense, means a positive bank account or the access to a credit line.
Another way of thinking: "If I write a check, will the bank
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The balance sheet always “balances”. Therefore sources and uses of funds should balance.

Sometimes this is clearly labeled as debt, but sometimes it is less evident
(accrued expenses or taxes payable).

Two successive balance sheets can be used to track sources and uses of funds for a company.

These accounts represent what would be owed to others if the company went out of business.

Critical Points to Analysis of
Sources and Uses of Funds
3. Depreciation is a source of funds.

Statement of Cash Flow
The fund sources and uses table could be constructed from two successive years of balance sheets.

Depreciation represents the declining value of assets that wear out and that, theoretically, will need to be replaced someday.

The SCF incorporates all information from the “sources and uses” analysis, plus some from the income statement or statement of retained earnings.

Depreciation represents funds that have come into a business and are being offset on the company's books against past asset purchases.

Working Capital

Once the money represented by depreciation is in the company, it can be used for any purpose, including the purchase of new assets and an increase in inventory and receivables.
If depreciation is spent on other things, it is not available to be spent on replacement equipment.
Nonetheless, as long as depreciation is left in a company

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