When looking at your Statement of Cash Flows, ask these 7 questions:
A refresher: Net Increase/Decrease of cash during period + Cash at beginning of period = Cash at end of period
The net increase/decrease is broken down into 3 categories:
β’ Operating
β’ Investing
β’ Financing
The net increase/decrease is broken down into 3 categories:
β’ Operating
β’ Investing
β’ Financing
β’ What is my operating cash flow?
The income statement includes non-cash charges (like depreciation), so this tells you if enough cash is coming in to support the ongoing operations of the business.
The income statement includes non-cash charges (like depreciation), so this tells you if enough cash is coming in to support the ongoing operations of the business.
β’ What are my non-cash charges?
Non-cash adjustments from the Income Statement include:
β’ Depreciation & Amortization
β’ Any deferred expense
Understanding non-cash charges helps you be able to quickly find them on the Income statement.
Non-cash adjustments from the Income Statement include:
β’ Depreciation & Amortization
β’ Any deferred expense
Understanding non-cash charges helps you be able to quickly find them on the Income statement.
β’ What are my capital expenditures (CapEx)?
CapEx is money spent on assets that will last over a year.
This helps you determine Free Cash Flow (FCF) for your business.
CapEx is money spent on assets that will last over a year.
This helps you determine Free Cash Flow (FCF) for your business.
FCF = Operating Cash Flow β Capital Expenditures
You might be generating enough money from operations, but if required to reinvest in CapEx, you could still be cash flow negative. FCF tells you this.
You might be generating enough money from operations, but if required to reinvest in CapEx, you could still be cash flow negative. FCF tells you this.
β’ What changes were there in debt structure?
Under Financial Activities, youβll find cash flow related to debt.
This helps you see:
βΈ new debt that was taken on
βΈ cash outflow from debt payments
βΈ how it relates to overall cash flow
Under Financial Activities, youβll find cash flow related to debt.
This helps you see:
βΈ new debt that was taken on
βΈ cash outflow from debt payments
βΈ how it relates to overall cash flow
β’ Did the owner put money in the company or take it out?
Under Financing Activities, this shows you if the company is generating profits in excess of what it needs to fund growth.
Under Financing Activities, this shows you if the company is generating profits in excess of what it needs to fund growth.
β’ Generally, where did my cash come from?
Ideally, cash generated from Operating Activities should be more than Investing and Financing.
Glance through the statement and confirm this. If not, dig into the individual items to determine why.
Ideally, cash generated from Operating Activities should be more than Investing and Financing.
Glance through the statement and confirm this. If not, dig into the individual items to determine why.
β’ What is my ending cash balance?
Ending cash balance should be looked at to determine:
βΈ Do you have enough cash reserves?
βΈ Did the cash balance go up or down?
Have 6-12 months of expenses in cash reserves, or at least know where youβre getting that cash from.
Ending cash balance should be looked at to determine:
βΈ Do you have enough cash reserves?
βΈ Did the cash balance go up or down?
Have 6-12 months of expenses in cash reserves, or at least know where youβre getting that cash from.
If you're a business owner or leader and don't feel confident looking at a financial statement, my 2 week cohort will help you:
β’ decode financial statements
β’ understand what metrics to track
β’ speak confidently with others
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β’ decode financial statements
β’ understand what metrics to track
β’ speak confidently with others
Apply today:
kurtishanni.com
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TL;DR
7 Statement of Cash Flow Questions:
What is my operating cash flow?
What are my non-cash charges?
What did I spend in CapEx?
What changes were there in debt structure?
Did the owner put money in or take it out?
Where did my cash come from?
What is my ending cash balance?
7 Statement of Cash Flow Questions:
What is my operating cash flow?
What are my non-cash charges?
What did I spend in CapEx?
What changes were there in debt structure?
Did the owner put money in or take it out?
Where did my cash come from?
What is my ending cash balance?
Interested in the Income Statement & Balance Sheet?
Last week I broke down 7 questions to ask when looking at the Income Statement:
Last week I broke down 7 questions to ask when looking at the Income Statement:
Tuesday I broke down the 12 questions you should ask when looking at the Balance Sheet:
Every Thursday I write a newsletter and share 1 framework and 1 financial concept.
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