This statement measures the viability of the business. The cash flow statement accounts for the cash available to the business owner or manager over the course of a particular time period and how this cash is used. Generally a cash flow statement is divided into monthly time periods; however, this statement could cover time periods as short as a day or as long as a year, depending on the particular needs of the business.
The cash flow statement consists of four major parts:
Cash available includes income from the sale of products or services, the beginning cash balance, owner injected capital and the sale of firm assets. The data developed from the marketing and pricing research will give a good estimate of the income from sales.
Cash required includes expenses for operating, income tax payments, interest and principal payments on loans, cash outlays for capital expenditures and other expenses. The cash required section will include only those expenses that required an actual cash outlay during the specified period.
Borrowings reflect any loans acquired by the business to cover expenses until income is received.
Other: is used to show the addition or withdrawal of funds from savings during surpluses or shortages. It also shows the level of cash on hand at the end of the operating period.
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