How to Read a Cash Statement
What is a “cash statement?”A cash statement, otherwise referred to as a “cash flow statement,” details how an individual or company's cash goes in and out over time. Basically, you have to know how much cash you need to operate a business, pay your bills or even buy a printing machine, for example. If you have a good cash flow statement, chances are either you or your company will survive business difficulties. Remember cash is king.
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Things You'll Need
- General business and math knowledge
- Internet Access
- Long and local telephone service
- Pen and paper
- Accounting software
Instructions
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To Read a Cash Statement
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Look for the word “Operations” in your statement. This first portion has to do with how much cash was needed to produce, sell or distribute items or material. These are generally for the short-term. Collections may also be notated, as well.
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Read about your long-term assets. Cash generated from property bought or sold will be in this section. If you buy securities or sell them, your numbers will show up in the investing portion of the cash statement.
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Review the financing section. This is usually notated in the middle portion of your cash flow statement. Some statements reverse investing with financing. Cash raised from stocks or bonds and banks loans will be there.
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Remember to read footnotes or any notations. People often disregard these items as secondary information. There are often important details delineated in the fine print, too.
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Tips & Warnings
Both the operations and investing portions of your cash statement generally have to do with how your company makes money. Financing may not always be part of this portion of your statement, although in most circumstances it is included.
Investing refers to how your company spends cash to make the company stronger. Experts generally refer to this as cash spent investing in the “growth” of a company.
Think of your cash flow statement like a weather map.
Know about the dangers of isolating your Operations Cash Flow. There is danger in only running a business from one source of cash.
Be appraised of your cash value. Also know the value of items purchased for your company will depreciated over time. This includes other short and long-term assets, as well.
