Cash flows from interest received on loans are reported in the statement of cash flows as part of:

Cash flows from interest received on loans are reported in the statement of cash flows as part of:

A cash flow statement is an important tool that management should review on a consistent basis to gain valuable insights into the company’s financial health and identify emerging or potential problems.

Cash flow statements help you understand your company’s performance by stating how much cash it has on hand, how much it’s taking in, and how much it’s spending.

In a moment, we’ll delve into how you can read a cash flow statement, but first, it’s important to understand the differences among various financial reports to appreciate the information a cash flow statement provides…

Cash Flow Statement vs Income Statement

Unlike an income statement (also known as a profit and loss statement) that records revenue as it’s earned, a cash flow statement represents how much cash your company has available to run the business at a given point in time and provides historical information on your sources and uses of cash.

Cash flow and income statements can view the same transaction in different ways, so it’s essential to understand their distinct purposes. For instance, a non-cash item like depreciation is recorded on the income statement as an expense throughout the life of the asset. But because depreciation does not represent an actual purchase that would reduce your available cash, it is added back to the cash flow statement.

Cash Flow Statement vs Cash Flow Forecast

While a cash flow statement looks at the present and recent past, a cash flow forecast uses a set of management assumptions to provide a forward-looking diagnostic model of what is expected to happen in the future.

Together, cash flow statements and forecasts help you understand your company’s financial situation by illustrating how much operating cash you have on hand (your liquidity), as well as your cash inflows and outflows. (mehr …)

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