The cash flow statement is a document which is one of the primary financial statements used by analysts to determine the financial health of a company. The cash flow statement details how much cash is being generated by your company over a given time period, usually one month or one year. There are three main categories shown on the document, and when these three categories are totaled, that is an accurate depiction of the increase or decrease of cash for the time period.

Operating cash flow

Operating cash flow begins with the net earnings or income for the period, which is calculated by subtracting all expenses from all revenues earned. To that figure, depreciation and amortization must be subtracted, since they represent the decrease in value of company assets. Next, any changes in working capital must be added in, either as an increase or decrease, with such changes consisting of differences between current assets and liabilities. After all these figures have been summed up, the resulting figure represents cash from operations, or the dollar amount generated by the business.

Investing cash flow

Any changes in long-term investments or capital expenditures are detailed in this category. For example, purchases of equipment or property during the period would be listed here. As a rule of thumb, any changes to long-term assets should be included in this category on the cash flow statement.

Financing cash flow

The information reported in this section is any changes which occur to long-term liabilities or stockholders’ equity. Some examples of line items in this category would be repayment of company debts, issuance of equity, and net cash used in financing activities. By adding up all three of these figures, the total cash from financing can be arrived at.

Cash balance

The last section of the cash flow statement reconciles the total cash position, and is a reflection of the summarization of the three categories above. This dollar amount will become the initial entry for the starting cast position on the cash flow statement for the next financial period.

Maintaining positive cash flow with Business Capital Providers

Maintaining positive cash flow is sometimes a difficult prospect, especially when customers aren’t prompt with payments. Contact us at Business Capital Providers to discuss options we may be able to provide you with, for helping to keep your cash flow on the plus side, and keep your business operating smoothly.