Cash Flow Statement
Statement of Financial Accounting Standards (SFAS)
What is GAAP?
Daily Cash Flow Forecast
Prepare an Investor Package
Cash Flow Statement Example
For example, Saundra has started providing angel investment to promising start-up businesses. Operating under the name Angelco, she is using the wealth she built in her professional career to provide a chance of success for up and coming Entrepreneurs. Saundra also is not afraid of the returns she will make if one of her portfolio companies were to succeed and reach capitalization.
Saundra has a job which requires constant due diligence. She must constantly monitor the companies she has invested in to ensure the professionalism with which she personally conducts business. As a result, she must constantly monitor financial statements. One such statement of monumental importance is the cash flow statement. Saundra survives, in part, through her skills of cash flow statement analysis.
Recent Changes of Balance Sheets
First, Saundra wants to know how recent changes to the balance sheets of her companies affect cash and similar assets. To do this she looks to the most recent cash flow statements which were sent to her. Upon inspection Saundra finds that three of her five companies are performing well and cash is increasing as income in the fledgling companies begins to outpace costs.
On her fourth company she does not see this result. Saundra understands that this could be the result of any number of reasons; slow growth, one-time problems, or poor management. Saundra has set a policy of allowing a grace period for problems to be rectified. Beyond this period, she will have to step in and replace current managers with her own team.
For her fifth company Saundra comes to the conclusion, after looking through her files, that she has not received a cash flow statement. She fears she may have to get tough with these founders but continues her analysis.
Monitor Financing, Investment, and Operational Performance
Saundra also wants to monitor the financing, investment, and operational performance of her companies. Again, she looks to the cash flow statement for this. Saundra, once again, is impressed with how her first three companies are controlling these actions. For her fourth company. she sees the core problem. They have purchased equipment at a price higher than average to the market. She notes that she must contact her managers to correct their mistake. With any luck, the equipment can be returned and purchased at a lower price, fixing both financing and investment issues in this business. She, of course, could not monitor this information with her fifth company.
Cash Flow Statement
Saundra has used the cash flow statement effectively because of her knowledge into the importance of the statement. Her experience combined with her analytical nature allow for effective monitoring of the big 3 financial statements: cash flow statement, income statement, and balance sheet.