Preparation for the Statement of Cash Flows

In order to prepare a cash flow statement, as part of the financial analysis, small business owner is the account information from both the profit and loss account and balance sheet of the company. is the key information required by the account profit and loss, net profit (or loss), and depreciation are considered in the cash flow business.

More information is needed to balance the practical analysis of cash flow. owner is to look at the past two years the balance sheet businesses and to compare the difference between the two draw up a statement of cash flows. The table shows that you will enjoy the relative balance of the company. Information from a sample of the profit and loss account and balance sheet information in these competitions, you can improve your cash flow.

Comparative analysis of the balance sheet of the Central

balance and develop a comparative statement of cash flows, should first consider an increase or decrease in your checking account the current division of responsibilities between the two this year, information on the balance sheet.

Here rule you should always keep in mind when making their statement of cash flows:

Accumulated loss of income, money.

Reduce accounts and now, money matters.

Increase accountability in the current account, the money will increase.

Reduction in the current liability account, the decrease in cash.

Cash flow from operating activities

Look at the balance sheet and accounts receivable increased from $ 170,000 to $ 200,000 increased $ 30,000. Since then, it will go to the best balance is shown as a negative number. Why? As the company expanded further $ 30,000 credit to customers was $ 30,000 less use. Similarly, stocks increased by $ 20,000. cut spending to pay $ 10,000. Capital costs only, source of funds, the company is positive. Cash increased by $ 35,000, but not included in our initial analysis. It quickly understand why.

Now, look at the balance sheet liability. Accounts payable increased by $ 35,000. Short-term bank debt has changed. Accrued expenses such as taxes and wages decreased by $ 5,000. Since this is a decrease in liabilities account, a resource company with a negative number.

Next is the net operating cash by collecting the first part of the cash flow statement. By adjusting net income and depreciation, you need $ 150.500. The company produces a positive cash flow from operating activities.

Cash flow from investing activities

part of the next issue of the cash flow statement, cash from investing activities. Normally this area is included in long-term investment company has more investment in fixed assets such as machinery and equipment. The company invested $ 30,000 more long-term investment in the 2009th It shows how a negative number, as they are used well. The company will also spend $ 100,000 plus plant and equipment.

Next is the net cash flow from investing activities, as summarized in Part II of the statement of cash flows. This is a negative $ 130,000 from this edition of the 2009th

Cash flow from financing activities

part of the last run the cash flow statement cash funding. In this case you need your company's finances and long-term bank loans increased by $ 50,000. Dividends to investors about the amount of $ 65,000 paid in cash and the release of a negative number. Net cash flow from financing activities is negative $ 10.500.

Net cash flow from the company

Now we combine the three parts of the cash flow statement to see where the company has a cash flow standpoint. If you have a net cash flow in each section you will find a positive $ 10,000. It is the increase in net cash flows for the year, for corporate business. Back to the cash balance sheet comparative analysis is correct. Cash increased by $ 10,000 from year to year.