The cash flow statement specifies all cash inflow (money from claims) and all cash outflow (payment of liabilities) in the balance sheet of a company in a particular period. Real cash flow captures the inflow and outflow.
The most used period for the monitoring of cash flows is a fiscal year, but this is not obligatory. It can also be drawn up in shorter periods (monthly, quarterly, half-yearly).
If this balance is positive, it is a liquid enterprise. On negative balance, it may mean that the income does not allow to pay bills and liabilities.
In addition to the financial statements, to the balance sheet and the inventory of assets, company funds, as well as liabilities on an Effective Date, and of the profit and loss account (of the difference between income and expenses), each company owner should always have the overview of the business accounts of his company.
For this purpose the Report on cash flow is an analytic sheet created for the owners of a company, its managers, investors and vendors and serves as a tool of information.
The statement of cash flows is an analytical tool for monitoring and managing the business.
Posted on June the 8th, 2011
