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Cash flow statements are particularly important for start-up companies with limited liquid assets. These companies are vulnerable to devastating cash shortages, even when Accounts Receivable balances point to long-term financial health. STATEMENT OF CASH FLOWS Statement of Cash Flow for the period 1/1/xx to 1/1/xx+1 Cash flow from operations (CFO) +/- x x Cash flow from investing (CFI) +/- y y Cash flow from financing (CFF) +/- z z Equals change in cash account = change of cash flow + Beginning of period cash + Beginning cash = Ending cash balance = Ending cash OPERATING ACTIVITIES Operating activities include the Production , Sales and Delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising and shipping the product. Items under Operating activities include:
INVESTING ACTIVITIES Investing activities focus on the purchase of the Long-term Asset s a company needs in order to make and sell its products, and the selling of any long-term assets that are no longer needed by the company. Items under Investing Activities include: FINANCING ACTIVITIES Financing activities include the influx of cash from Investor s such as Bank s and Shareholder s, as well as the outflow of cash to investors as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Items under the Financing activities section include: PREPARATION METHODS Direct Method Shows the major classes of gross cash receipts and payments. This method starts with sales and mirrors the Income Statement while also including Current Assets and Current Liabilities. Indirect Method Shows the net profit or loss as a starting point and makes adjustments for all transactions of a non-cash item EXAMPLE 1 The cash flow for this example is +$40.00. EXAMPLE 2 Citigroup Incorporated cash flow: ( ([http://www.citigroup.com/citigroup/fin/ar.htm ) SEE ALSO |
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