Measuring your Cash Flow
Cash flow involves three aspects, the core operations, financing and investing. A cash flow statement must be done by every business and this is besides the income statement and your balance sheet. It is the core business operations that are connected with the inflows and outflows of your cash. Operations refers to the accounts payable, accounts receivable, your inventory and the depreciation.
The amount that you invest in assets or equipment is another way of measuring your cash flow. You may be leasing your equipment instead of owning it and this is still seen as investing and part of the cash-out item.
Financing involves loans or debts and part of your cash flow statement. Any dividends that were earned must be noted along with any capitol that was earned. Dividends that are paid out to someone or something as also part of financing. Generally, financing is for the bigger companies as they bond to the public for growth created from cash received but all dividends that were paid to bondholders, effects cash flow.
