Whatever be the size of the business, the cash flow always poses an important aspect to the business. The entire business owner will make their best effort to make the cash flow as smooth as possible. A smooth cash flow for a business indicates the business is running properly and it can achieve its goal. In order to maintain a smooth cash flow for your business, it is very important to understand the basic of the cash flow phenomenon. Here we are presenting the common terminology associated with the cash flow for your better understanding.Sponsored Links
Cash flow: The cash flow term is a very common term to understand. It indicates how the cash is flowing for the business. Literally how much money is coming to your business and how much is going outside towards your business. All the income for the business and the expenditure will also comes under the purview of cash flow. Generally the cash flow is calculated over a period of time.
Total cash balance: it indicate the total amount of money you have for your business and the amount of money you have in hand for the operation of your business. Generally this money is available to legitimately expend, or the amount of money the business owes to a financial institution and its allies business. The over draft facility obtained by the bank will also comes under the cash balance.
Cash flow statement: The cash flow statement is a financial and systematic representation of the total movement of cash (inward and outward) for the business. Generally the statement is prepared over a period of time. While preparing the cash flow statement for the business activities like cash flow from selling goods and cash flow from paying expenses will be taken into consideration. At the same time cash flow from sale or purchase of assets and the change in the fixed assets will also included in the cash flow statement.Sponsored Links
Operational cash flow: The operational cash flow is the cash flow which accounts towards the operation of the business. In fact all the unexpected transaction will not be taken into consideration for the cash flow statement. During the course of the business all the profit and the deprecation for the fixed asset of the business also figures in the cash flow. The revenue and profit will be added where ass the depreciation will be reduced to the cash flow statement.Sponsored Links
Cash flow for non business activity: It is not mandatory that all the entry for the cash flow will be from the business activity. There are some other non business activity is also included in the cash flow statement. Some common activities like installation of plant and machinery and furniture and fittings and all together with an increase in or repayment of business loans will also figure on the final cash flow statement. Finally the profit Vs cash aspects will be taken into consideration for the final presentation of the cash flow statement.