Cash Flow Funding

The net cash flow in or out for a business for an accounting period must be matched by changes in cash flow funding.

If we use the example cash flow statement below, the top half of the cash flow statement shows the cash flows in and out due to operating. financing and investing activities the final figure (highlighted in green) represents the net cash flow out of the business, in this case 57,000. In order for this to happen, the business must match this cash flow out with additional funding.

Last modified December 16th, 2019 by Michael Brown
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Cash Flow Direct Method Formula

The cash flow statement direct method is based on cash receipts and cash payments. Bookkeeping systems are not designed to easily access this information in the format required and cash flow direct method formulas are required to compute receipts from sales, interest and dividends and payments for expenses, interest and income tax.

Last modified February 17th, 2021 by Michael Brown
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Direct Method Cash Flow Statement

The cash flow from operating activities for a business can be presented using either the statement of cash flows direct method or alternatively the indirect cash flow statement. The direct method cash flow shows gross cash receipts and payments whereas the indirect method cash flow shows net income and adjusts this for balance sheet movements.

Last modified March 29th, 2021 by Michael Brown
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Cash Flow Ratios Calculator

This cash ratios calculator uses operating cash flow instead of net income to calculate three financial ratios. Unlike net income, cash flow is an objective measure of performance which cannot be manipulated or distorted using accounting assumptions and opinions.

Last modified July 16th, 2019 by Michael Brown
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Cash Flow Ratio Analysis

Cash flow ratios can be calculated using cash flow from operating activities found in the cash flow statement of a business. Using cash flow avoids the use of net income which is a subjective measure traditionally used in the calculation of accounting ratios.

Last modified August 23rd, 2019 by Michael Brown
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Relationship Between Financial Statements

The four main financial statements are the income statement, statement of retained earnings, balance sheet, and cash flow statement. All four statements are interrelated and allow the user to more fully understand the financial performance of the business through the analysis of its financial statements.

Last modified July 16th, 2019 by Michael Brown
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Non Cash Expenses

Non cash transactions are expenses such as depreciation, bond amortization, and share based compensation expenses which are simply accounting entries and do not involve the movement of cash.

Last modified January 13th, 2020 by Michael Brown
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Vertical Analysis

Vertical analysis definition: A technique of analyzing financial statements by restating each line item (e.g. sales and marketing expenses) as a percentage of another base line item (e.g. Revenue). The horizontal analysis reports are not required by Accounting Standards, and are used more as a management tool rather than a formal reporting document.

Last modified July 22nd, 2019 by Michael Brown
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Nonprofit Financial Statements

A nonprofit organization (NPO) is an organization that has no owners and which uses its net income to help it achieve the aims for which it was established. All surplus net income has to be kept within the organization, and not paid out as dividends or distributions.

There are three main not for profit financial statements, the statement of financial position, the statement of activities, and the statement of cash flows.

Last modified January 13th, 2021 by Michael Brown
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Cash Flow Statement Analysis

It is quite feasible for a business to show a healthy balance sheet and be profitable, but if it runs out of cash it will fail.

The balance sheet only shows the position at a particular point in time, and the income statement deals in profit not cash. The purpose of the business cash flow analysis is to correct this situation.

Last modified June 7th, 2022 by Michael Brown
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Classification of Cash Flows

The classification of cash flows into one of three types of business activity (operating, investing, or financing), is to help the user of the statement of cash flows to understand how the business generates and uses cash.

Last modified March 19th, 2020 by Michael Brown
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