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Small Business articles. Learn a little more each week.

Cash Flow Calculations, Simplified

Posted by Mark Vega on 4/28/17 11:42 AM

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If you're in business, you already know that multiple activities contribute to cash coming into and going out of the business. These activities all show up on the cash flow statement and help you pinpoint just how much cash your business generates.

In this activity, you'll calculate the sum of these cash flow activities. Sure, you could do these calculations on the back of a napkin (or have your accounting software do it for you) but doing them yourself on a sample statement will help you see how the calculations work. This is useful knowledge to have when it comes to reviewing your own cash flow statements--something you should do regularly.

Cash flow calculations involve some fairly simple math but don't worry--you won't be doing anything more complex than addition or subtraction. 

In this short activity, you will calculate:

  • Net Cash Flow from Operations
  • Net Cash Flow from Investing Activities
  • Net Cash Flow from Financing Activities
  • Cash at End of Month

ACTIVITY INSTRUCTIONS:

  • Download the Sample Cash Flow Statement. You might want to print it out and have it beside you as you read on.
  • The Cash at Beginning of Month section is already filled out for you, as is Cash Receipts from Customers
  • Under Cash Paid For the amounts are already filled in. Note: debits, or cash going out, are indicated with parentheses.

STEP ONE: Calculate the total for Net Cash Flow from Operations

  • For this, you'll need to find the total for the amounts included under Operating Activities. This will include Cash Receipts from Customers and Cash Paid For
  • Remember: Parentheses around an amount indicates cash going out of the business, therefore you must subtract that amount. It may be helpful to total the amounts under Cash Paid For and then subtract that total from Cash Receipts
  • Calculate the total and place it in the appropriate box.

STEP TWO: Calculate the total for Net Cash Flow from Investing Activities

  • For this, you'll need to find the total for the amounts included under Investing Activities.
  • Two amounts are already included: one indicating cash coming in to the business and another indicating cash going out.
  • Calculate the total and place it in the appropriate box.

STEP THREE: Calculate the total for Net Cash Flow from Financing

  • For this, you'll need to find the total for the amounts included under Financing
  • Two amounts are included: both indicating cash going out.
  • Calculate the total and place it in the appropriate box.

STEP FOUR: Calculate Net Increase in Cash

  • For this, you'll need to find the sum of all three categories: Operating, Investing, and Financing
  • The sum is the amount the cash for a business either increased or decreased. Hint: this sample business's cash increased.

STEP FIVE: Find the total for Cash at End of Month

  • You're almost finished!
  • Now, find the sum of Net Increase in Cash and Cash at Beginning of Month
  • This sum will be your Cash at the End of the Month. If you were to prepare a Cash Flow Statement next month, this amount is the amount you would bring forward and put in the Cash at Beginning of Month box.

Topics: Accounting & Finance, How-To, Cash Flow