How to Prepare a Cash Flow Statement

How to Prepare a Cash Flow Statement

A cash flow statement is important to your business because it can be used to assess the timing, amount and predictability of future cash flows and it can be the basis for budgeting. A cash flow statement can answer the questions, ” where did the money come from?” “Where did it go?&quot_

This Business Builder will introduce you to the cash flow statement and its importance for financial management. Through the use of a worksheet, the Business Builder will guide you through the construction of a cash flow statement for your business. The cash flow statement is a complex financial statement and by necessity, this Business Builder contains information on sophisticated accounting topics.

For your business, the cash flow statement may be the most important financial statement you prepare. It traces the flow of funds (or working capital) into and out of your business during an accounting period. For a small business, a cash flow statement should probably be prepared as frequently as possible. This means either monthly or quarterly. An annual statement is a must for any business.

A cash flow statement can be used to assess the timing, amount and predictability of future cash flows and it can be used as the basis for budgeting. You can use a cash flow statement to answer the questions, “where did the money come from?” “Where did it go?” A loan officer will use cash-flow analysis techniques to evaluate the firm’s ability to generate cash to repay a loan. A cash flow statement is also a key to understanding the investment and financing philosophy of a borrower. Continue reading “How to Prepare a Cash Flow Statement”