Help With Understanding Cash Flow Statement

A cash flow statement is a financial statement that shows the income and expenditures of a company for a specific period of time. Companies regularly prepare these statements on a quarterly basis although there are some that put out an annual report for their stockholders. As a holder of common stock on a company it is important that you have an understanding of the cash flow statement to determine whether or not the company is making a profit. The changes that occur on such a statement include a balance sheet, income accounts, a list of assets that could be converted to cash or its equivalent and break down the analysis into three areas: operating, investing and financing. The amount of cash flow a company has will give you a good idea of how well-equipped the company is in its ability to pay its debts.

The balance sheet of a cash flow statement is a bird's eye view of a company's financial resources and its liabilities at any given time. The income statement gives the details of the company's sales or the income generated from its operation. These two facets of the statement are the basis of the accounting system of the company. You will not only see income and expense transactions on such a statement, but you will also see transactions that may or may not be reflected in cash values, such as write-offs in bad debts and depreciation of the assets, such as for the building and the equipment.

There are four main purposes for a statement of cash flow:

- To provide stockholders and others with information about the company's liquidity and solvency and its ability to continue its operations.

- To provide information about changes in the assets and equity

- To improve the ability to compare its operation and performance with that of similar companies

- To give an idea of what future cash flow will look like

The divisions of a cash flow statement are: operating activities, investing activities and financing activities. It is important to be able to understand what each of these elements of the statement tell you about the company. Some of the things you will see included in each of these sections are:

- Operating Activities.

* Sales receipts

* Interest received on loans

* Dividends received on equity securities

* Payments to suppliers

* Payments to employees

* Tax payments

* Interest paid on loans

* Depreciation

* Deferred tax payments

* Mortgage payments

* Profit of loss from the sale of assets

- Investing Activities

* Collections on loan principals

* Investment returns

* Receipts from the sale of real estate or equipment

* Expenses associated with purchasing real estate or equipment

* Loans

* Expenses for purchase of other firms' equity interests

- Investing Activities

* Proceeds from issuing shares

* Proceeds from issuing short or long term loans

* Payment of dividends to stockholders

* Payment for buying back company shares from stockholders

* Repayment of debts

* Receipts of charitable donations

About the author:
For more information on understanding cash flow statement as well as lots of stock trading tips and stock market tips visit www.TradingSphere.com

More Finance information like Warren Wong's at Credit-Voitures.com

How much did you learn from this article?

Not yet Rated

Click the XML Icon to Receive Financial Planning Articles Via RSS!

Additional Articles From - Home | Finance | Financial Planning

Money Saving through Thrift Shops - By : Anjitha Sakthidharan
Simple Tricks to Cut UK Student Living Costs - By : Anjitha Sakthidharan
Financial Freedom Takes The Load Off - By : Chris Kennelly
How to Set your Financial Priorities - By : Anjitha Sakthidharan
The Rise of Investment Clubs in the UK - By : Tom Burroughes
Why High Net Worths Need Credit Services? - By : Tom Burroughes
Rasing Your Credit Score In Two Easy Steps - By : michael gentleman
How is Your Identity Stolen? - By : michael gentleman
Using An Advantageous Debt Consolidation Rate - By : Chris Kennelly
Financial Planning Is Important For A Good Retired Life - By : Amit Kheterpal

This Article

	Blog This
	Print This Article
	Post Comment
	Add To Favorites
	Email it
	Ezine Ready
View in your own language (translate) Using Google™ Tanslator

Webmasters/Ezine Tools

Top Authors
Most Popular Articles
Ezine Notifications
Article RSS Feeds

Additional resources

Credit-Voitures.com

Link to Us
Contact Us
Privacy Policy
Terms of Service

Monetize Your Site

Get 1750 private label articles and 15 reports EVERY SINGLE MONTH!

Promote Ebooks with ClickBank
PayDotCom

CPA Empire
Modern Click

The Affiliate Classroom
The Science of Getting Rich

This site is hosted with

Finance News

Click the embed button to show this video box on your site

Click the embed button to show this article box on your site

© 2007 Credit-Voitures.com™ All Right Protected.
Use of our free service is protected by our Privacy Policy and Terms of Service

Disclaimer All articles published by www.Credit-Voitures.com are for informational purposes only.
All articles are not meant to be used for legal, medical, or any other type of advice.
If you require such advise, please refer to a certified expert.