Along with an income statement and a balance sheet, the cash flow statement provides a (potential) investor with valuable insight about the health of a business.
It covers three key areas where cash moves in and out of a business. 1) Operations 2) Investments and 3) Financing.
When reviewed with an income statement (a.k.a. Profit and Loss or P&L Report) and a balance sheet (Assets & Liabilities), an investor can really get a sense of how well a business is doing and make a much more informed decision about his/her involvement.
Worthy of note: when reviewing a cash flow statement it’s important to look over a span of time as opposed to just a snapshot because while a company showing negative cash flow could be indicative of poor performance, it could easily reflect the opposite – that the company is reinvesting cash to grow the business rather than leaving it in the bank to receive little to no return.
To learn more about analyzing or preparing financial statements and/or increasing cash flow consider contacting Chris McGee, Business Coach and QuickBooks Expert at (360) 303-5798 to schedule your free consultation.
ProFound Impact is a division of Business Support Services Northwest, LLC. Providing Payroll, Bookkeping and Accounting Software Solutions to Bellingham, WA and surrounding area businesses for over 30 years.