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Looking at a cash flow statement does not have to seem like a foreign language

Hello my consequent OpusTimenautes,

For those of you that are not in the business or entrepreneur world,  do you know what a cash flow statement is??

The wikipedia definition of a cash flow statement is:

In financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities.”

To say it in plain English,  cash flow statement will show you the money that comes in and goes out in a company at a given time. It is the generation of income and the payment of expenses. Period!!

Computer Icon Michael Dell said:

“We were always focused on our profit and loss statement. But cash flow was not a regularly discussed topic. It was as if we were driving along, watching only the speedometer, when in fact we were running out of gas.”

To become proficient in Cash Flow Statement you need to know that the cash generated in a company comes from three activities which are: Operating, Investing & Financing. With that been said here they are the 13 ways to become the MacGyver of cash flow statements.

Operation Activities (section 1 )

  1. Operating activities are defined as the company’s primary business activities.
  2. Includes the production and delivery of goods and services.
  3. They determine a company’s net income ( liquidity ).  It must be positive to make the business viable.
  4. Analyses the company cash flows from income or losses.
  5. Reconciles an opening balance to an ending balance after accounting for all cash receipts, depreciation and paid expenses in a time period.

Investing Activities ( section 2 )

  1. Includes purchases or sales of long term assets like plants, properties, machinery and investment securities.
  2. Cash is used to invest in the business.
  3. Selling of an asset ( cash inflow ).
  4. Purchasing of an asset ( cash outflow ).

Financing Activities ( section 3 )

  1. Includes the activities related to receipt and repayment of funds provided by creditors and investors, like a issuance of a debt or equity securities, repayment of debt and distribution of dividends.
  2. Cash from the sales of a stock, bonds or borrowing ( cash inflow ).
  3. Cash for Bank loan repayment ( cash outflow ).
  4. Expanding the business through equity or borrowing.

There you have it folks!! A good cash flow statement is crucial to run a successful business, and you need to count with an awesome client management software like OpusTime to achieve your goals and make a profit. Don’t wait any longer and visit www.opustime.com to try your 30 days free trial period.

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