Financial Plan - Cash Flow Statement

Cash is the King! To analyse the Cash inflows and Outflows, there is a need for Cash Flow Statement. Cash flow and Income Statement are similar as both report Company's performance over a specified period of time. Cash Flow differs from Income Statement when it comes to non-cash accounting items such as depreciation and amortization. The cash flow statement tells you about how much cash the company has generated by stripping away non-cash accounting items. The Cash flow statement is also used to determine company's ability to finance growth related activities and ability to pay bills and creditors. The potential buyers and investors use the cash flow statements to make crucial decision about investing in the company.

Cash Flow statement has three components:

Operating Cash Flow:It has another name - Working Capital. This is the cash generated from product / service sales and from internal operations, so it can be controlled.

Investing Cash Flow:This cash flow is generated internally from non-operating activities like investments in plant and equipment or other fixed assets and non-recurring loses or gains.

Financing Cash Flow:This cash flow is the cash to and from external sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan, the issuance of stock and the payment of dividend are some of the activities that would be included in this section of the cash flow statement.



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