A cash flow statement is a report that analyzes the financial movements that affect cash flow.
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As an investor, I want to understand how the company receives and spends its cash so that I can understand whether the company is funded by its own operations, investing in the future, and/or borrowing excessively.
Cash flow is classified in the following ways:
Operations can be calculated using a direct or indirect method that is explained as follows:
The indirect method starts with the net income from the income statement and adjusts it according to the net changes of accounts receivable (A/R), accounts payable (A/P), and inventory
The direct method sums cash transactions between our customers, suppliers, and employees
Investing includes purchasing and selling assets, such as offices or equipment
Financing includes receiving or paying a bank loan
To create a cash flow statement, we have to find every G/L account that affects the accounts that represent cash assets. In order to...