Monthly Cash Flow Statement: Fill & Download for Free

I have put 3 Years of Articleship training in Cash Flow statement. All the amounts are in Monthly figures.

The question being asked can be refined into two very different questions. I go into both questions below using the example of CyrusCo, which makes twerking gadgets. The company is run by its CEO Miley.1) How can a company make an accrued profit but still be cash flow negative?2) How can a company make a cash profit but still be cash flow negative?Regarding the first question:1) How can a company make an accrued profit but still be cash flow negative?GAAP accounting is based on the accrual method of accounting, not the cash method of accounting. The accrual method records revenues when they are earned. The cash method of accounting records revenues based on when the actual cash is received.The Cash Flow Statement is one of the three primary financial statements for GAAP accounting, with the Income Statement and Balance Sheet being the other two. The Cash Flow Statement is made up of 3 segments: Cash Flows from Operations, Cash Flows from Investments and Cash Flows from Financing.The first line in the Cash Flow Statement isn't cash revenues but actually net income. Net income is the last line from the Income Statement. Why is this the first line on the Cash Flow Statement? What the Cash Flow Statement actually does is it starts with net income and makes adjustments and reconciliations for (i) non-cash and cash items from the Income Statement and (ii) non-cash and cash changes in the Balance Sheet to arrive at a true change in Cash Flows from Operations for the fiscal period being measured.GAAP accounting is based on rules made primarily for keeping score on operational performance. Because the timing of actual cash inflows and outflows can be lumpy, even within the same industry, GAAP through its accrual method of accounting enables you to make more of an apples-to-apples comparison for similar companies being measured in a given time period, especially if the companies are at different stages of growth. But more than anything, GAAP is a way to make earnings and performance look smoother and more predictable by using accrual accounting. This smoothing makes it easier for analysts, especially equity analysts, to make more "predictable" models and price targets. You notice, most investors and analysts focus on EPS as the denominator in the P/E ratio. But net income per share or earnings per share or EPS is rarely a pure cash figure; the theory is, over time, the actual cash flows available to equity holders should approximate the net income figure, especially in aggregate over a long period of time.So here is an example of how a company can be profitable on an accrued GAAP basis but cash flow negative:During the month, CyrusCo received a $100 order for its new twerking gadget. The customer made the purchase online using a credit card. So CyrusCo records $100 of revenues earned for the month on its Income Statement. Assume that it cost CyrusCo $25 in costs and inventory to make and deliver the twerking gadget. Assume there are no taxes. The Income Statement for the month looks like this: $100 revenues - $25 costs = $75 profits or $75 net income. The twerking gadget is shipped to the customer the same day; however, the month has now ended and the credit company has yet to pay the $100 cash to CyrusCo. So what ends up happening is this. On the Cash Flow Statement, you have: $75 net income - $100 increase in accounts receivable = -$25 Cash Flows from Operations, which is negative cash flow. Because the $100 cash has yet to be received from the credit company, it's recorded as an increase of $100 in accounts receivable, so you have to adjust the $75 net income because it was purely accrued earnings and 100% non-cash.This makes sense because the inventory and the costs you spent to make and deliver the twerking gadget are all sunk costs: -$25. You just haven't received the cash revenue of $100, yet, to offset the cash costs.Additionally, if CyrusCo were to immediately replace the recently sold twerking gadget by buying new inventory with cash, that increase in inventory will put Cash Flows from Operations further into the red, as the company will be buying new inventory with cash upfront, while still waiting for the $100 of cash from the credit card company for the first twerking gadget that had already been sold.Regarding the second question:2) How can a company make a cash profit but still be cash flow negative?So going back to the example above, assume the customer didn't use a credit card but used cash instead. So $100 cash was paid upfront to CyrusCo for the twerking gadget. So the Income Statement looks the same: $100 revenues - $25 costs = $75 profits or $75 net income. The twerking gadget is shipped to the customer the same day. On the Cash Flow Statement, you have: $75 net income - $0 increase in accounts receivable = +$75 Cash Flows from Operations, which is positive cash flow. No adjustment had to be made for an increase in accounts receivable because all the revenues were already received immediately as $100 cash from the customer.Now, there are still two segments of the Cash Flow Statement remaining that can drive this +$75 Cash Flows from Operations into the red:1) Cash Flows from Investing and2) Cash Flows from Financing.If the twerking gadgets are flying off the shelves and CyrusCo's CEO Miley realizes that she needs to expand manufacturing capacity, she could invest in building a new plant by spending $1,000 in growth capital expenditures. Cash Flows from Investing would then show -$1,000. With the +$75 of positive Cash Flows from Operations, CyrusCo would have net cash flow so far of +$75 minus $1,000 = -$925 cash flow. This is negative cash flow.Now, with the last remaining part of the Cash Flow Statement, Cash Flows from Financing, the following could occur. To finance the growth capital expenditures for the new plant, CyrusCo could have raised capital from the debt markets with a bond offering. Say, the bond offering was for $800. So Cash Flows from Financing will show +800 cash proceeds from the bond offering. This will only offset the -$925 in cash flow so far by +$800.So putting it all together:Cash Flows from Operations = +$75Cash Flows from Investing = -$1,000Cash Flows from Financing = +800Total Net Change in Cash = -$125This negative cash flow of -$125 occurred even though you still had cash profits of $75.Source: S&C Messina Capital

What is the statement of cash flows?The statement of cash flows or a cash-flow statement is a statement showing inflows (receipts) and outflows (payments) of cash during a particular period. In other words, it is a summary of sources and applications of cash during a particular span of time. It analyses the reasons for changes in the balance of cash between the two balance sheet dates. The term ‘cash’ here stands for cash and cash equivalents. A cash flow statement includes only those items which affect cash.A cash flow statement can be for the past or can be projected for a future period.Objectives of Cash Flow Statement:1. To ascertain the sources (receipts) of cash and cash equivalents from operating, investing and financing activities of the enterprise.2. To ascertain the applications (payments) of cash and cash equivalents under operating, investing and financing activities of the enterprise.3. To ascertain the net change in cash and cash equivalents i.e., the difference between sources and applications under the three activities between the dates of two consecutive balance sheets.4. To highlight the major activities that have provided cash and that have used cash during a particular period and to show their effect on the overall cash balance.Uses of Cash Flow Statement:1. Useful for short-term financial planning: A cash flow statement provides information for planning the short-term financial needs of the firm. Since it provides information regarding the sources and utilization of cash during a period, it becomes easier for the management to assess whether it will have adequate cash to meet day-to-day expenses and pay the trade payables in time, whether it will have sufficient cash to pay the long-term loans and interest there on and whether it has enough cash to pay for the purchase of fixed assets or not.2. Useful in preparing the cash budget: A cash flow statement prepared for the future period is helpful in preparing a cash budget. It informs the management about the surplus or deficit periods of cash, i.e., in which months the receipts of cash will be in excess of payments and in which months the payments will be in excess of receipts. It helps in planning the investment of surplus cash in short-term investments and to plan short-term credit in advance for deficit periods.3. Comparison with the cash budget: A cash budget is prepared at the commencement of the year, whereas a cash flow statement is prepared at the end of the year. A comparison between the two helps in ascertaining the extent to which the financial resources of the firm have been generated and used according to the plan. Causes of variances between the figures of two statements can be analyzed and proper corrective measures may be taken4. Study of the trend of cash receipts and payments: A cash-flow statement reveals the speed at which the cash is being generated form trade receivables, inventory and other current assets and the speed at which the current liabilities are being paid. It enables the management to assess the true position of the cash in future.5. It explains the derivations of cash from earnings: A firm may earn huge profits yet it may have paucity of cash or when it suffered a loss it may still have plenty of cash. A cash flow statement explains the reasons for it.Limitations of cash-flow statement:1. Not suitable for judging the liquidity: It does not present true picture of the liquidity of a firm because the liquidity does not depend upon cash alone. Liquidity also depends upon those assets which can be converted into cash easily. Exclusion of these assets obstructs the true reporting of the ability of the firm to meet its liabilities when they become due for payment.2. Possibility of window-dressing: The possibility of window-dressing is higher in case of cash position in comparison to the working capital position of a firm. The cash balance can be easily maneuvered by postponing purchases and other payments and by rapidly collecting cash from trade receivables before the balance sheet date. Hence, a fund-flow statement presents a more realistic picture than a cash-flow statement.3. It ignores non-cash transactions: Cash-flow statement ignores non-cash transactions like purchase of fixed assets by issuing shares or debentures, conversion of debentures into shares, issue of bonus shares etc. Hence, the true position of an enterprise cannot be judged by cash-flow statement.4. It ignores the accrual concept of accounting: It is prepared on cash basis and hence ignores one of the basic concepts of accounting, namely accrual concept.5. No substitute for an income statement: A cash flow statement is not a substitute of income statement which takes into account both cash and non-cash items. Therefore, net cash flow does not mean net income of the business.Thank you for reading :)