How to Parse Your Cash Flow Statement

If you aren’t familiar with cash flow statement, it’s a document which depicts the amount of cash generated and used during any given time frame, generally covering a month or a year. It’s one of the primary financial statements used to determine the overall health of a small business. Basically, the cash flow statement will detail line items which fall under three distinct categories of financial activity, those being operating activities, investing activities, and financing activities. By summarizing all three of these categories, an overall cash position is arrived at for the time frame in question.

Operating activities

The specific detail lines which appear under operating activities include all those associated with net income or earnings for the period, amortization and depreciation of any assets owned by the company, and any increases or decreases to working capital. The end result of summarizing these individual areas provides a net figure which is used in conjunction with the other two categories to calculate overall cash position.

Investing activities

Investing activities include all those details which are related to investments in any kind of equipment or property, as well as any cash used for other investments. Since investment involves an outflow of cash, all items listed in this section will be subtractions from overall cash position, and will negatively impact your bottom line, despite the fact that they may contribute to the growth of your business.

Financing activities

Financing activities include incoming funds from lenders, which is a plus amount currently and a subtraction later on, when it is paid back. Another influx of cash is provided by monies from equity holders, although that also becomes a subtraction when it has to be repaid to those individuals. The last source of activity in this section is cash from financing, which is determined by adding up all increases and decreases from long-term liabilities and equity accounts.

Need help with cash flow? 

At Commercial Capital Lending, helping small businesses is what we do best, and if your small business is experiencing temporary cash flow issues, we may be able to help. Contact us at Commercial Capital Lending, so that our financial specialists can go to work on your behalf, and explore options for providing with the funding you need.


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