Cash Flow Statement

1. Cash Flow Statement • Why is the cash flow statement so important? • Cash is King • No business will survive long without adequate cash flow. (There are a few exceptions)

2. Cash Receipts • Will equal sales if we have a “cash” business • That means that we do not have accounts receivable • A/R can be sold to Factoring organizations

3. Loans • Many businesses will experience short-term shortages of cash. • Often the shortages are seasonal in nature • Through “Operating Loans” banks will finance these shortages.

4. Purchases • Do not always match COGS • Inventory may be purchases in anticipation of increases sales volume. • Conversely, inventory may be sold off in months when “purchases” are small.

5. Expenses • Many of the expense categories will mirror what is on the income statement. • Except “Depreciation and Amortization” • These are commonly referred to as non-cash expenses

6. Principal Payments • These are included on the cash flow though they are not a part of the income statement.

7. Owner’s withdrawal • Why is that separate from salaries?

8. Pre-startup Information • Where does it come from? • Balance sheet. • We include all but the pre-paid expenses because they won’t have an impact on cash

9. When we are done • Where does the final cash flow number get copied to? • The end of the year balance sheet – “Cash”