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how to prepare a cash flow statement
What You Should Know Before Getting Started 3
Components of a Cash Flow Statement 5
How to Prepare a Cash Flow Statement 6
Constructing the Statement 10
How to Analyze a Cash Flow Statement 16
Checklist 18
Resources 18
Notes 19
3. what to expect
What is a Cash Flow Statement?
This Business Builder assumes that a
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An Overview
ABC Wholesale Company Cash Flow Statement
Cash Flow From Operations
Net Income* $200
Additions (Sources of cash)
Subtractions (Uses of cash)
Net Cash Flow From Operations 165
Cash Flows From Investing Activities
Cash Flows Associated with Financing
Net Change in Cash (205)
7. Exhibit 1
From the Roots Up Income Statement
Sales $8,158
Gross Profit 3,263
Operating Profit 391
Net Income $269
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Exhibit 2
From the Roots Up
Comparative Balance Sheet Prior Year Current Year Balance Cash Source/ Activity
200X 200Y Change (Cash Use) Type
Total Assets $2,455 $2,973
22
Totals Liabilities and Equity $2,455 $2,973
9. Table I
Cash Effects of Balance Sheet Account Changes
Cash Inflow Cash Outflow
Table II
Cash Flows by Activities
Operating Activities Investing Activities Financing Activities
Operating Activities Investing Activities Financing Activities
Borrowed
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Operating Activities
The Direct Method
Table III
Cash Flows from Operating Activities Using the Direct Method
—
— other
able —
11. Exibit 3
From the Roots Up Statement of Cash Flows - Direct Method
Net Sales $8,158 Income Statement
Change in Account Rec. Net (175) Balance Sheet
Less Bad Debt Expense (33) Income Statement
Cash Collected From Sales 7,950
Cost of Goods Sold (4,895) Income Statement
Change in Inventories (177) Balance Sheet
Change in Accounts Payable 89 Balance Sheet
Cash Paid to Suppliers (4,983)
Cash from Trading Activities 2,967
General and Administrative Expenses (2,839) Income Statement
(less noncash expenses)
Change in Accruals 10 Balance Sheet
Cash from Operating Activities 138
Change in Other Assets/Liabilities 4 Balance Sheet
Net Cash From Operations $142
The Indirect Method
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Table IV
Cash Flows from Operating Activities using the Indirect Method
Table V
Cash Effects of Income Statement Account Changes
Cash Inflow Cash Outflow
13. Exhibit 4
From the Roots Up Statement of Cash Flows - Indirect Method
Net Profit $269
Non-Cash Changes
Depreciation, Amortization 188
Change in Allowance for Bad Debt 4
Net Income Adjusted for Non-Cash Changes 461
Change in Accounts Receivable (179)
Change in Notes Receivable (84)
Change in Inventory (177)
Change in Accounts Payable 89
Change in Salaries 10
Change in Other Short-Term Notes Payable 22
Net Cash Provided by Operations $142
Investing Activities
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Cash Flows From Investing Activities
+ Proceeds From Sale of Assets
- Purchases of Property and Equipment
= Total Net Cash Provided (Used) by Investing Activities
Financing Activities
Cash Flows From Financing Activities
+ Net Borrowing Under Line of Credit Agreement
+ Proceeds From New Borrowings
- Repayment of Loans
- Principal Payments Under Capital Lease Obligations
- Dividends/Distributions/Withdrawals Paid
+ Proceeds From Issuance of Stock
+ Partner/Owner Capital Contributions
=Total Net Cash Provided (Used) by Financing Activities
15. Cash Flow Statement
Description 12 Month Period
Net Sales $8,158
Change in Account / Notes Rec-Trade (Net) (208)
Cash Collected From Sales 7,950
Cost of Sales / Revenues (4,895)
Change in Inventories (177)
Change in Accounts Payable-Trade 89
Cash Paid to Suppliers (4,983)
CASH FROM TRADING ACTIVITIES 2,967
General and Administrative Expenses (Less Non-Cash Expenses) (2,839)
Change in Accruals and Other Pay 10
Cash Paid for Operating Costs (2,829)
CASH AFTER OPERATIONS 138
Change in Other Assets / Liabilities 4
Other Income (Expense) and Taxes Paid 4
Net Cash After Operations 142
Interest Expense (122)
Dividends - Paid in Cash (137)
Cash Paid for Dividends and Interest (259)
NET CASH INCOME (117)
Current Portion Long-Term Debt
CASH AFTER DEBT AMORTIZATION (117)
Change in Net Fixed Assets (32)
Change in Investments (84)
Cash Paid for Plant and Investments (116)
FINANCING SURPLUS (REQUIREMENTS) (233)
Change in Short-Term Loans / Other Payables 53
Change in Long-Term and Sub Debt (90)
Change in Other Non-Current Liabilities 126
Change in Capital 198
Total External Financing 287
CASH AFTER FINANCING* 54
Add: Beginning Cash & Equivalents 169
Ending Cash Equivalents $223**
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Operating Activities
Investing Activities
Financing Activities
17. Cash Flow Statement Worksheet
Description 12 Month Period
Net Sales
Change in Account / Notes Rec-Trade (Net)
Cash Collected From Sales
Cost of Sales / Revenues
Change in Inventories
Change in Accounts Payable-Trade
Cash Paid to Suppliers
CASH FROM TRADING ACTIVITIES
General and Administrative Expenses (Less Non-Cash Expenses)
Change in Accruals and Other Pay
Cash Paid for Operating Costs
CASH AFTER OPERATIONS
Change in Other Assets / Liabilities
Other Income (Expense) and Taxes Paid
Net Cash After Operations
Interest Expense
Dividends - Paid in Cash
Cash Paid for Dividends and Interest
NET CASH INCOME
Current Portion Long-Term Debt
CASH AFTER DEBT AMORTIZATION
Change in Net Fixed Assets
Change in Investments
Cash Paid for Plant and Investments
FINANCING SURPLUS (REQUIREMENTS)
Change in Short-Term Loans / Other Payables
Change in Long-Term and Sub Debt
Change in Other Non-Current Liabilities
Change in Capital
Total External Financing
CASH AFTER FINANCING*
Add: Beginning Cash & Equivalents
Ending Cash Equivalents
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Operating Activities
Investing Activities
Financing Activities
Cash Flow Analysis
resources
Books
Cash Flow Analysis
Healthy Business Guide,
Websites
The Trade Creditor’s Guide to the Statement of Cash Flows,
www.crfonline.org/orc/cro/cro-10.html
