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A cash flow statement is a financial report that shows incoming and outgoing money during a particular period (often monthly or quarterly). It does not include non-cash items such as depreciation. This makes it useful for determining the short-term viability of a company, particularly its ability to pay bills. People and groups interested in cash flow statements include:
- Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses
- Potential lender s/ creditors, who want a clear picture of a company's ability to repay
- Potential investors who need to judge whether the company is financially sound
- Potential employees or contractors who need to know whether the company will be able to afford compensation
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.
1 Cash Flow Info & Decision Making
"Cash is King"
2 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 balance
+ Beginning of period cash + Beginning cash
= Ending cash balance = Ending cash
3 Analyzing Cash Flows from Operations
- non-cash items
- depreciation
- deferred tax
- interest amortization
- accrual items, such as wages payable
4 Methods for preparing SCFs
- Direct Method
- Indirect Method
5 Examples
Citigroup Incorporated cash flow: ([1]) ([2])
Cash Flow (In millions of dollars)
| Period Ending | 31-Dec-03
|
| Operating Activities, Cash Flows Provided By or Used In
|
| Net Income | 17,853
|
| Depreciation | 2,121
|
| Changes In Liabilities | 31,571
|
| Other | 985
|
| Total Cash Flow From Operating Activities | (14,854)
|
| Operating Activities, Cash Flows Provided By or Used In
|
| Total Cash Flows From Investing Activities | (46,307)
|
| Investing Activities, Cash Flows Provided By or Used In
|
| Dividends Paid | 5,773
|
| Issuance of long-term debt | 67,054
|
| Payments and redemptions of long-term debt | (45,800)
|
| Change in deposits | 42,136
|
| Other | (4,758)
|
| Cash flows from financing activities of continuing operations | 64,405
|
| Effect Of Exchange Rate Changes
|
| Effect of exchange rate changes on cash and cash equivalents | 579
|
| Change In Cash and Cash Equivalents
|
| Change in cash and due from banks | $3,823
|
6 See also
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