One of the most essential services we at AFS Taxsavers are proud to provide is the creation of cash flow statements. Not only are these highly significant tools for business owners themselves, but if your company is publicly traded then it is actually mandatory for you to release one of them every quarter, making it available to both the general public and the SEC. So what is this document exactly and why do so many place such value in it? Well, it’s basically a measure of how much cash is going in and out of your business. Basically, the report looks at the amount of revenue you began a certain period with and then it watches that revenue pass through your company, tracking each dollar. At the end of the period, the statement will tell you whether or not your cash flow is healthy or inadequate.
HOW DOES IT WORK?
Cash flow statements are created through the consideration of three factors:
Income from operating activities: We begin with your company’s net income as determined by your latest income/expense statement. We then subtract any number of deductions from that amount, things like depreciation, changes to your inventory and capital you may have sent out or been promised which has not yet left or arrived. Once all of these factors, and many more, have been considered, we’ll have a picture of the cash you’ll truly have at your disposal for carrying out the actual operating of your business.
Income from investing activities: Next, we look at how much money you’ve spent on various investments, as well as how much you’ve gotten back. Here we consider the things you’ve purchased using the funds allocated to you, including any and all assets you may have produced. We’ll examine these investments closely to determine whether or not they’re effectively generating capital for your company. Money going out is regarded as a negative amount just as money going in is noted as positive. For this reason, when we calculate the total income you’ve earned from investing the amount may in fact be negative.
Income from financing activities: Finally, we’ll look at all the other capital that’s coming in and going out of your business. Perhaps you’ve issued some stock. Perhaps you have debts to pay. Maybe you need to share some of your funds with various investors through the payment of dividends. All activity of this type will be considered and used to calculate a total. As with the previous category, this final amount may be positive or negative.
In the end, these three amounts will simply be added together to determine your cash flow situation.
WHY IS THIS IMPORTANT?
Cash flow statements tell you a great deal about your business. They’ll let you know whether or not your financing and investing activities are paying off, whether your assets are truly beneficial or not, even whether or not your company is truly profitable. They are an important tool which every company should utilize. In fact, they’re basically essential. We’re proud to offer you the opportunity to have easy access to such important information. With the help of our painstakingly constructed cash flow statements you’ll be able to turn your business around or rest easy (if only for a moment) in the knowledge that your enterprise is running smoothly.