Quantitative Analysis Chapt 5(1)

A cash flow statement is one of the most important financial statements for a project or business. The statement can be as simple as a one page analysis or may involve several schedules that feed information into a central statement. a cash flow statement is a listing of the flows of cash into and out of the business or project. Think of it as my checking account at the bank. Deposits are the cash inflow and withdrawals are the cash outflows. The balance in my checking account is my net cah flow at specific point in time. It is listing of cash flows that occurred during the past accouting period. A projection of future flows of cash is called a cash flow budget. it is not only concerned with the amount of the cash flows but also the timing of the flows. many cash flows are construected with multiple time periods. It may list monthly cash inflows and outflows over a year's time. it not only projects the cash balance remain at the end of the year but also the cash balance for each month. working capital is an important part of a cash flow analysis. it is defined as the amount of money needed to facilitate business operations and transactions, and is calculated as current assets less current liabilities. Computing the amount of working capital giges you a quick analysis of the liquidity of the business over the future accounting period. if working capital appears to be sufficient, developing a cash flow budget may be not critical, But if working capital appers to be insufficient, a cash flow budget may highlight liuidity problems that may occur during the coming year.