How to Finance a Business : How to Understand a Cash Flow Statement

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Temat: Biznes

Hello, my name is Emily Gasner, and I'm with Working Solutions. I'll be talking about how

to read a cash flow statement. As an entrepreneur, you'll need to know how to understand financial

statements. And one of the three most importance financial statements is the cash flow. The

cash flow shows you actually how much money is coming in and going out of your business

during this set period of time. For example, from January 1st, 2008 to July 11th, 2008.

What you will see, and there are a variety of different formats for this cash flow statement,

is all of the cash coming in from things like sales, your accounts payable, any monies that

you're being received, as well as the money going out. So the money might be going out

in the form of loan payments, salaries, overhead expenses like your retail location, and at

the end of each statement you will see what you're ending cash flow is. So after you account

for the cash that's flown out, and the cash that's flown in, that will show you how much

money you have at the end of the month. It's really important to make sure that you always

have a positive cash flow position. If not, you have no cash to actually pay your bills.

So understanding the very detailed nature of the cash flow is important, and programs

in software such as Quickbooks can actually print out those reports for you. The different

formats are not necessarily important. They all show the cash coming in and out. However

there is one that shows a section for your investment activities, another that shows

your financing activities, and a third section that shows your operation activities. And

those are the basic pieces of a cash flow statement.

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