A Statement of Cash Flows details a company’s cash inflows and outflows from operating, investing, and financing activities, helping management and investors understand the sources and uses of its cash position and ability to meet financial obligations.
Primary Implication
Use your Statement of Cash Flows to answer two crucial questions concerning cash. First, “Where did our money come from?” and “Where did the money go?”
If you struggle with answering these two fundamental business questions, you don’t know how your Financial Statements can help you make more money immediately.
Overview
A business’s Statement of Cash Flows provides a comprehensive picture of the company’s cash flows beyond operations. Use this financial statement to follow how cash changes from the beginning to the end of a period.
Banks like to see this statement to see both the actual and projected incomings and outgoings of cash over an accounting period. This statement answers the following questions:
- Where did the money come from, or where will it come from?
- Where did the money go, or where will it go?
Operating cash flow is the best method for generating cash in a business, and it’s the most cost-effective way to make new investments in your business, repay financial debt, or return capital (money) to the owners. Additional questions to ask after reviewing your Statement of Cash Flows are “What action should we take today to hold onto more of our cash from operations?” and “Who is the best person to ensure these cash savings occur?”