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)

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

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.

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.

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

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

Owner’s withdrawal Why is that separate from salaries?

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

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