The language of cash flow - Deepstash

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The language of cash flow

Profit is not cash. A healthy business needs both profit and cash.

Inflows: Cash moving into a business

Outflows: Cash moving out of a business

Types of cash flow:

  • Cash from operating activities
  • Cash from investing activities
  • Cash from financing activities

Financing a company: Getting a company the cash it needs to start up or expand.

Cash flow can be calculated by looking at the income statement and two balance sheets. When you know a company’s cash situation, you can understand what’s going on now, where the business is headed, and the priorities of senior management.

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Understanding how the numbers are used and what are assumptions puts you in control of the decisions.

Financially intelligent managers understand the four distinct skill sets:

It consists of three main categories:

The art of accounting is taking a limited set of data to get an accurate description of how well a company is doing.

Accountants use accruals and allocations to attempt an accurate picture of the business for a month.

A balance sheet shows what a business owns at a particular time. A balance sheet always balances. Assets = liabilities + owners’ equity.

A good manager is aware of how both cash and profits affect a balance sheet. A balance sheet shows if a company is financially healthy.

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This book teaches the fundamentals of owner compensation, profit targets, labour productivity, cash flow, and data reporting. Clear explanations and helpful illustrations throughout make it a must-read guide for small business owners looking to achieve higher profits.

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