Statement of cash flows includes group cash flows that aren’t related to operations nor investments. If you think about it, your company operates, that’s it’s primary purpose. Your company also invests into assets, whether they’re physical assets, financial assets or say subsidiaries. However, your company also needs financing (that is investments to parties making those financing cash flows). If first two are sort of internal activities, the third is related to external activities, namely showing how much money the company has been able to get from third parties and how much has it paid back to those parties.  Continue reading →

One of the reasons why it’s important to have positive cash flows from operations arises from the fact that for sustainability your company at some point needs to invest. The investments may be smaller and regular or substantial and take place less often, however the fact remains that to keep the business going at one point you will require investments.  Continue reading →

Cash flows from your company’s operating activities are the most important ones in terms they show whether your very core of business is generating or losing cash. A sustainable business is always earning cash so it’s important to have cash flows operating activities positive. Should it be that they are negative, it’s important to understand the reasons behind and ensure that it’s one-off and not a regular thing.  Continue reading →

Cash flows are in fact very important for your company. ‘Cash’ in itself is a resource usable for everything your business needs to keep on running – buying goods to sell, paying for wages, buying services and so on. It’s also a resource to be paid as dividends, i.e. owner’s income from the operations of the company.  Continue reading →

Recognizing purchasing and payables on the statement of cash flows is in fact straightforward.  Continue reading →

Money that you’re lending from someone is extra funding you’re getting for your business, for your company. It’s essentially called ‘external capital’ – external since it’s not paid into the company by the owners and capital since it’s funds given to be used either for investing, for financing everyday activities etc. It’s also said that a healthy company is using about 2/3 of ‘external capital’ and 1/3 of its own capital (that is capital paid into and not taken out as dividends by the owners).  Continue reading →

When settling your receivables and payables, you’re not actually paying any cash (or at least not for the full amount). Thinking about the statement of cash flows now I would say that you’re not supposed to show those transactions there either.  Continue reading →