The Handbook of Financial Modeling: A Practical Approach to Creating and Implementing Valuation Projection Models by Jack Avon

Author:Jack Avon
Language: eng
Format: mobi, epub
ISBN: 9781430262053
Publisher: Apress
Published: 2013-11-13T05:00:00+00:00

Figure 9-3. This figure shows a sample cash flow statement

In any business, a lack of cash, even for a short time, can force a business to close. A cash shortage is very difficult for a business to overcome. To foresee and hopefully avoid cash flow problems, it is a good practice to maintain a cash flow statement.

The balance sheet shows the health of a business as of a specific date. An income statement tells how a business performed over a period of time. Instead of looking back, you can use the cash flow statement as a planning tool to help you in the future. This statement will help you target when cash will be needed to pay bills and help managers to make business decisions, such as when to expand a business or take on a new product line. The cash flow statement only deals with cash activity: cash paid out and cash taken in. It also helps identify those periods when borrowing should be considered and allows you to make arrangements before cash is actually needed. Preplanning is very helpful when working with bankers.

An estimated cash flow statement should be made during the budgeting process for the year of operations. The year can be broken down by quarter or month to provide greater control. The cash flow statement should include as much detail as possible without making it too cluttered. Importantly, get as many line item details in the statement as you can; that will provide greater transparency than a summarized version.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.