Cash Flow Breakdown

Chapter 16: Cash is King - Page 16.3

Cash Flow Breakdown

In the following sections, I will explain the Cash Flow table (also called pro forma Cash Flow), row by row, and how the numbers in your Cash Flow have a direct impact on the Balance Sheet, to help you better understand the direct relationship of one table to another, and how changes in one table directly affect the other. For the purpose of discussion, I divided a standard Cash Flow table into separate sections, Cash Received and Expenditures.

Cash Received

The following illustration lists possible cash sources for our sample company. Most of these have balance sheet impact, and several come from the income statement. For now, we'll focus just on the cash flow. After dealing with cash, before we go on to the balance in Financial Analysis: Finish the Financials, we'll also look briefly at the specific cash flow implications on the balance sheet.

Sample Case Cash Received

In this section of the Cash Flow table, we list money received, such as cash sales and monies received from accounts receivable. (Amounts shown in thousands. Numbers may be affected by rounding.)

The first row, "Cash Sales," is a simple estimate. It should link with your sales forecast and income statement to avoid inconsistencies. Normally, credit card sales are grouped into cash sales because the business gets the money in a day or two. Cash in this case means cash, check, and credit card, everything except the real sales on credit, in which the product or service changes hands in advance of the payment.

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