Cash Flows, Explained

Cash flow is the amount of money coming in and going out of your business, but there’s more to it than that.  More money coming in than going out is a positive cash flow, but that doesn’t mean you’re profitable.

To really understand your business, a statement of cash flows should be part of your regular business reporting package.  The statement of cash flows breaks down into three categories: 

Operating Cash Flows
The money your business generates based on your day-to-day business activities. It basically shows the cash impact of your revenues and expenses.

Investing Cash Flows
The inflows and outflows related to market securities and long-term assets.  Long term assets are things like property and equipment.  Some companies will have significant investing cash flows (e.g. manufacturing firms) whereas others may have little or none.

Financing Cash Flows
The funds flowing between the company, its investors and creditors.  Depending on how the company is capitalized, financing cash flows can be somewhat complex.

Schreiber Accounting and Advisory offers financial statement preparation as well as full outsourced accounting services to help you manage your business more effectively.  Contact the firm for more information.

Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.