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2 because the collection days estimator is set to 60

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Unformatted text preview: statements, Income (above), and Balance (right), we set the starting points for a detailed cash example taken from the sample company used as a case in the previous two chapters. In both cases the numbers are shown in thousands, and may be affected by rounding. You can compare this simplified Income to the Detailed Profit and Loss example in the previous chapter. Cash Flow Breakdown In the following sections, I will explain the Cash Flow table (also called pro forma Cash Flow), row by row, and how the numbers in your Cash Flow have a direct impact on the Balance Sheet, to help you better understand the direct relationship of one table to another, and how changes in one table directly affect the other. For the purpose of discussion, I divided a standard Cash Flow table into separate sections, Cash Received and Expenditures. CHAPTER 16: CASH IS KING 16.3 Cash Received The following illustration lists possible cash sources for our sample company. Most of these have balance sheet impact, and several come from the income statement. For now, we’ll focus just on the cash flow. After dealing with cash, before we go on to the balance in Chapter 17: Finish the Financials, we’ll also look briefly at the specific cash flow implications on the balance sheet. SAMPLE CASE CASH RECEIVED In this section of the Cash Flow table, we list money received, such as cash sales and monies received from accounts receivable. (Amounts shown in thousands. Numbers may be affected by rounding.) 1. The first row, “Cash Sales,” is a simple estimate. It should link with your sales forecast and income statement to avoid inconsistencies. Normally, credit card sales are grouped into cash sales because the business gets the money in a day or two. Cash in this case means cash, check, and credit card, everything except the real sales on credit, in which the product or service changes hands in advance of the payment. 2. The second row, “Cash from Receivables,” is an estimate of the dollar amount received from customers as payments of accounts receivable. This is critical to your cash flow. Estimating money from receivables is vital. You should...
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