The cash flow statement
The cash flow statement can be used to establish if a business is healthily investing its capital and finances. Reduced cash flow is an indicator of ineffective management. Good managers review and predict the cash flow to be able to improve operations and appropriately balance the outflows with the inflows. This is possible through controlling the factors and activities that influence that cash flow statement. This paper looks at business activities that affect cash flow.
The activities affecting cash flow are divided into three main categories; operating activities, investing activities, and financing activities (Kaspina et al., 2015). Operating activities include the normal day to day business operations such as sales and the related income, inventories, sale, and purchase of assets, depreciation, and other activities resulting in changes in operating capita. Investing operations, on the other hand, include the issue of new capital such as purchase and sale of marketable securities, any transactions around the acquisition of property, issuance of new debts, debt repayment, and dividend payments. A lot of other activities may be part of the investment income. Financing activities are the third set of business activities that affect cash flow. They include activities such as purchase and sale of common stock, payment of taxes related to net share, equity award settlements, issuance and repayment of term debts, repurchase of common stock, among other long-term financing activities.. Don't use plagiarised sources.Get your custom essay just from $11/page
It is the role of the financial manager to make sure that the three sets of activities are harmoniously managed to improve the balances. I understand a positive balance indicates that the business is healthy and operating efficiently. However, is there a time when a negative balance can occur even with efficiency?
References
Kaspina, R. G., Molotov, L. A., &Kaspin, L. E. (2015). Cash flow forecasting as an element of integrated reporting: an empirical study. Asian social science, 11(11), 89.