Cash Flow Statement CMD

The Cash Flow Statement Higher/Int 2 Business Management 2009-2010

The Cash Flow Statement
A Cash Flow Statement is produced by an organisation in addition to the Trading Profit and Loss Account and Balance Sheet .
This statement shows movements of cash over the past year .

Cash Management
Poor cash management is the second most popular reason for business failure .
The concept of cash flow is centered around liquidity - the ability to maintain sufficient liquid assets to meet day to day commitments .

Cash Management
Most businesses fail , because they run out of cash and not because they lack success or profits .
A Cash Flow Statement provides an easy means by which to track the movements of cash .

Terms
Cash Inflow:
a movement of cash into the business e.g. cash sales.
Cash Outflow:
a movement of cash out of the business e.g. cash purchases.

Cash Movements
Cash Inflows:
Decrease in debtors.
Increase in creditors.
Loan received.
New capital invested.
Profits.
Sale of a fixed asset.
Sale of stock.
Cash Outflows:
Decrease in creditors.
Dividend payment.
Drawings.
Increase in debtors.
Loan repaid.
Losses.
Purchase of a fixed asset.
Purchase of stock.

The Cash Flow Cycle CASH Buy Resources Use Resources to make Goods and Services Sell Goods and Services to Generate Cash

Cash Flow Statement CMD

by knoxbusiness on Jan 01, 2010

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