The first 5 numbers to look at in a cash flow statement
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The document outlines key numbers to analyze in a cash flow statement, focusing on five critical figures: cash at year-end, net change in cash, net cash flow from financing activities, net cash flow from investing activities, and net cash flow from operating activities. It emphasizes the importance of assessing the trend of these numbers compared to the previous year and understanding their implications on the business's cash flow. Questions are provided to gain insights into the cash movements within the company's operations, investments, and financing practices.
The first 5 numbers to look at in a cash flow statement
- 1. The first 5 numbers to look at in a cash flow statement from businessbankingcoach.com in association with
- 2. Here’s the scenario: the client has just given you the financial statements for the business and you have to say something quickly – here’s what to look at in the cash flow statement with some questions to ask
- 3. A cash flow statement is never an easy document to read, that’s why we want to focus on these three main points to keep it simple and to give you an idea of what happened to the cash in the business during the period
- 4. How much cash was left at the end of the period (usually a year)? Was the change in the amount of cash left positive or negative from the previous year? What happened to the cash in each of the three sections of the cash flow statement - operating, investing and financing?
- 5. 1st number Cash at end of year
- 6. 1st number Cash at end of year Has the number gone up from previous year or gone down?
- 7. 1st number Cash at end of year Is the trend likely to continue in the current year? Has the number gone up from previous year or gone down?
- 8. 2nd number Net change in cash
- 9. 2nd number Net change in cash Has the number gone up from previous year or gone down?
- 10. 2nd number Net change in cash Which section of the cash flow statement contributed most to the change? Has the number gone up from previous year or gone down?
- 11. 3rd number Net cash flow - financing activities
- 12. 3rd number Net cash flow - financing activities Has the total number gone up from previous year or gone down?
- 13. 3rd number Net cash flow - financing activities Did the change in short-term liabilities generate cash (more risk) or utilise cash (less risk)? Has the total number gone up from previous year or gone down?
- 14. 3rd number Net cash flow - financing activities Did the change in short-term liabilities generate cash (more risk) or utilise cash (less risk)? Are increases in long-term liabilities matched by increases in non-current assets in cash from investing activities section? Has the total number gone up from previous year or gone down?
- 15. 4th number Net cash flow - investing activities
- 16. 4th number Net cash flow - investing activities Has the number gone up from the previous year or gone down?
- 17. 4th number Net cash flow - investing activities Were non-current assets disposed of to generate cash? Were they productive assets? Has the number gone up from the previous year or gone down?
- 18. 4th number Net cash flow - investing activities Were non-current assets disposed of to generate cash? Were they productive assets? Are new investments productive? Has the number gone up from the previous year or gone down?
- 19. 5th number Net cash flow - operating activities
- 20. 5th number Net cash flow - operating activities Has the number gone up from the previous year or gone down?
- 21. 5th number Net cash flow - operating activities Is the cash flow from operations positive? If not, how will that be reversed in the current year? Has the number gone up from the previous year or gone down?
- 22. 5th number Net cash flow - operating activities Is the cash flow from operations positive? If not, how will that be reversed in the current year? How did changes in working capital (stock and trade debtors) affect cash flow? Has the number gone up from the previous year or gone down?