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Video: Cash Flow Statement Explanation

Video Transcript


Hi. I'm Isaac Rodriguez. I'm a business consultant. I want to get into with you a cash flow statement explanation. Cash is king; that's what I was always told by my credit officers when I worked for the bank. Follow the cash; where is it? How does it work? Well, the financial statement that an accountant prepares will have a document in behind your income statement and balance sheet that is called a cash flow statement. What is it? What does it tell you? The cash flow statement will tell you the changes in your assets and whether or not they depleted or added to your cash. For example, if your accounts receivable in your business went up, that means you sold goods but you haven't been paid for them yet. So, you've paid for those goods, that cash went down. So, the cash flow statement is going to reflect that for accounts receivable; it's also going to reflect that for inventory and it compares one point in time from year to year. So, if your accounts receivable were a hundred dollars the end of last year and they're fifty dollars at the end of this year, that means you collected fifty dollars and that adds to your cash. And you go by every asset category and see how that affected your cash position. At the end, that's going to tell you how your cash flowed, negatively or positively. Hopefully, it was positive. I'm Isaac Rodriguez, business consultant.
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