The Main Financial Statements

613 WordsFeb 17, 20182 Pages
The Main Financial Statements Cash Flow management Cash flow forecasting sets out anticipated inflows and outflows of cash in the coming months of trading. Cash flow can be described as the movement of money through the business and it is one of the most important aspects of financial management to keep the business solvent and trading. It is possible for a company to be cash rich but not generating any profit and also for a profitable business to have no cash and be unable to pay its creditors. There are two main ways to avoid cash flow problems; Speed up cash inflows and delay cash outflows. (Marcousʹe, 2003) Cash flow forecasting is different from the cash flow statement, whereas the cash flow statement shows what has happened in the past i.e historical data the cash flow forecast is based on an estimate of future cash flow. By creating a detailed estimate of the inflows and outflows expected in the next period the company can derive the cash flow forecast and by calculating each month’s figures the cumulative cash position can be assessed. This gives the company an idea of any times that they may face a negative cash flow balance and arrangements can be made to make sure extra finance is available in this period. (Lines and Marcousʹe et al., 1996) Cash flow and Profit Cash flow and profit are not the same thing, the objective for a business is not only to make a profit, but to also generate cash flow. Making profit from cash flow is the main and most important cash
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