WorkingPoint uses the indirect method for reporting cash flow. The Cash Flow Statement is divided into three major categories: Operating, Investing and Financing Activities. Show sample report
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Section |
Description |
Accounts Involved |
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Operating Activities |
Operations activities include your day-to-day business transactions used to produce and sell your goods and services. *Depreciation Expenses are added back to your Net Income as an adjustment. Since Depreciation is a non-cash event, this adjustment reverses the expense brought in via Net Income. |
Depreciation Expense* Accounts Receivable |
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Investing Activities |
Investing activities include changes in cash brought in from or paid out for long-term assets, like property, plant, and equipment; other investments, like stock purchases; and loans to others and receiving the payments on loans. |
Fixed Assets |
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Financing Activities
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Financing activities includes changes in cash used to purchase or issue company stock or repayments of loans. |
Long-term Liability |
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Net Change in Cash |
This is the total change in your cash for all activities during the given period. How it is figured: Cash Flow from Operating Activities + Cash Flow from Investing Activities + Cash Flow from Financing Activities = Net Change in Cash |
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You can use this report to:
Compare cash from operating activities to net income.
If your cash from operating activities is higher than your net income, then your income is "high quality"; if it is lower, then you should look to see why you are not converting net income into cash.
Examine your financing and investing activities to see how you are choosing to spend your money.
Provide potential lenders the necessary report so they can determine if you have the potential to pay back your loans.
Show potential investors how you use your cash.