Cash Flow Statement Example

As mentioned in the article on income statements

Cash Flow Statement Example

The income statement indicates the profitability of a company’s operations while the balance sheet reveals the financial health of a company at a given point of time. However, both these statements tend to ignore the cash generating capacity of a business, and profitability does not always guarantee liquidity. Generating cash over time is very much essential for a company’s long-term survival, as it is required for conducting day-to-day operations. Many firms have failed due to a lack of cash on hand, even though their operations have been profitable.

There are two methods of preparing a cash flow statement, the Direct, and Indirect method. We will show you a cash flow statement example for both, starting with the direct method.

Direct Method

The direct method for creating a cash flow statement reports major classes of gross cash receipts and payments.

Format of Statement of Cash Flows (Direct method)

Cash Flows from (used by) Operating Activities:

Cash Receipts from:

Customers $X,XXX
Interest $X,XXX
Total Cash Receipts $XX,XXX
Cash payments for:
Merchandise Purchases $X,XXX
Operating Expenses:
Employees $X,XXX
Payroll Taxes $X,XXX
Advertising $X,XXX
Supplies $X,XXX
Insurance $X,XXX
Miscellaneous $X,XXX
Total $XX,XXX
Interest $X,XXX
Income taxes $X,XXX
Total Cash Payments $XX,XXX
Net Cash Flows from Operating Activities $XX,XXX
Cash Flows from (used by) Investing Activities:
Proceeds of Notes Receivable $XX,XXX
Net Cash Flows from Investing Activities $XX,XXX
Cash Flows from (used by) Financing Activities:
Repayment of Mortgage $XX,XXX
Issuance of Common Stock $XX,XXX
Payments of Dividends ($XX,XXX)
Net Cash Flow used by Financing Activities ($XX,XXX)
Net Increase (Decrease) in Cash $XX,XXX



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