Cash Flow Statements

In order for a business to grow, sometimes they need to rely on investors and creditors. Before deciding to work with you however, they will want to know the financial standing of your business, and they’ll want to see a cash flow statement. The team at Chandler & Knowles has over 20 years of experience handling the accounting side of businesses, including cash flow management services. You can trust our team to provide a well-organized and accurate statement of cash flow that will impress any investor.

What is a Cash Flow Statement?

A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. These statements measure how well a company manages its cash position. This means it measures how well a company generates cash to pay outstanding debt obligations and fund its operating expenses.

There are three important sections of a cash flow statement:

• Operating activities

• Investing activities

• Financing activities

Operating activities are the primary revenue-generating activities of an organization. Investing activities are any cash flows from the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities are any cash flows that result in changes in the size and composition of the contributed equity or borrowings of the entity.

Cash flow statements allow investors to understand how a company’s operations are running, where its money is coming from, and how money is being spent. They help investors determine whether a company is on a solid financial footing or not. Creditors on the other hand, use cash flows to determine how much cash is available for the company to fund its operating expenses and pay its debts.  

Learn more about: Cash Flow and Budgeting Analysis

How to Set Up a Cash Flow Statement

While each company will have its own unique line items, the general setup is usually the same.

1. Operating Cash Flow

A cash flow statement begins with cash flow from operating activities. It starts with net income or loss, followed by additions or subtractions from that amount to adjust the net income to a total cash flow figure. What is added or subtracted are changes in the account balance of the items found in current assets and current liabilities on the balance sheet, as well as non-cash accounts like stock based compensation.

2. Investing Cash Flow

This section on the statement of cash flow is referred to the cash flow from investing activities and this section reports changes in capital expenditures and long term investments. Capital expenditures can refer to the purchase of property, plant, or equipment assets. Long-term investments may include debt and equity instruments or other companies. One important thing to remember is that a change in the long-term assets in the balance sheet is reported in the investing activities of the cash flow statement.

3. Financing Cash Flow

This category is also called cash flow from financing activities. It reports any insurance or repurchases of stocks and bonds of the company, as well as dividend payments it makes. The changes in long-term liabilities and stockholders’ equity in the balance sheet are reported in financial activities.

4. Cash Balance

The last section on the cash flow statement is a reconciliation of the total cash position, which connects to the balance sheet.

Cash Flow Management Services Near Me

We understand that not everyone is familiar with cash flow statements and that they can be tricky to maneuver. That's why we offer cash flow management services to businesses of all sizes. Our team of experts at our tax accounting firm will keep your books well balanced and organized so you always know your financial standing.

 

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