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Cash Flow Analysis: Basics and Strategies

Cash Flow Analysis : Basics and Strategies

Cash flow is revenue and cash equivalents, like stocks and securities, that a company generates or spends over a certain period. This indicates the company’s runway: The more money on hand and the lower the cash burn rate, the more runway a business has to move freely, and typically, the higher the business’s valuation. You can manage cash and track your overall financial performance with the help of cash flow. If you don’t have an effective cash flow management and analysis, you will still wonder why your cash in the bank is drained despite the huge profits in your report. In this blog, you will learn more about kickstarting your cash flow with its basics and strategies.


What is cash flow analysis?


Revenue types to keep track of include revenues from operating activities, revenues from investing activities, and revenues from financing activities. The types and amounts of these three kinds of revenue listed on a company’s cash flow statement are tracked and analyzed to help determine the liquidity and solvency of the cash flow. This analyzes running activities, cash flow from investing activities, and cash flow from spending activities for the business.

Cash Forecasting

Cash forecasting for the company is beneficial for understanding how well its lines do on the balance sheet. From that, businesses can ascertain where money tends to be injected and what to expect from their cash flow.


Cash flow can indicate whether something is good or bad, and the money spent doesn’t always contradict this fact. Your analysis of your cash flow determines a company’s cash flow, or the money available to meet its obligations and remain operational. That is totaled as the asset capital minus the liability capital. Furthermore, this analysis helps you understand if your business can satisfy its obligations. You will see whether or not you can generate sufficient cash to remain open for many years. Long-term negative cash flow situations might be an indication of upcoming bankruptcy. On the other hand, consistent positive cash flow can be an indicator of great success.


Cash Flow Analysis Basics 


Cash flow analysis demands that a company generates cash statements pertaining to its operating cash flow, investing cash flow, and financing cash flow.


Your operating activities cash reports represent money spent by business owners on operating expenses deducted from the revenue received through operating activities. Included in this bucket are yearly, recurring expenses such as salaries, utilities, supplies, and rent.


Fixed assets, on the other hand,  refer to fixed assets, which include plants and real estate. Long-term or capital investments encompass these kinds of investments.


Moving forward, cash flow financing is the fund from the company’s owners, investors, and creditors. You can also refer to it as debt, equity, and dividend transactions on the cash flow statement.


Cash Statements 


It is time to get acquainted with the accounting equation’s functions that are used to determine a company’s operating cash flow statement. The invoice items factoring into the computation of the company’s net income, and counted within the operating cash flow statement, include but are not limited to revenues and expenses. Below are what you should not miss on your cash statement reports.


  • Cash received from sales of goods or services
  • The purchase of inventory or supplies
  • Employees’ wages and cash bonuses
  • Payments to contractors
  • Utility bills, rent or lease payments
  • Interest paid on loans and other long-term debt and interest received on loans
  • Fines or cash settlements from lawsuits


You can calculate the operating activities of cash flow statements through financing cash flow and operating cash flow. 


Financing Cash Flow


This is the money moving between a business and its owners, investors, and creditors.

Operating Cash Flow


The Cash Flow Statement Direct Method takes all cash collections from operating activities and subtracts all cash disbursements from the operating activities in order to obtain net income. This starts with net earnings and adds or subtracts from that sum for non-cash revenue and expense items.


Investing Cash Flow


The next part of a cash flow statement is investing cash flow. That bottom line is the sum of how much money was received from the sale of assets, paying back debts or selling stock, and subtracting the price of purchasing assets, stock, or loans.


Cash Budgets 


A company will use a cash budget to find out whether it has sufficient capital to operate for a particular duration.

Best Strategies For Creating Cash Flow Analysis


MoolahMore provides a few strategies for creating a good cash flow analysis

Cash Flow Analysis Templates 


Accounting and bookkeeping software or an ERP can readily generate a statement of cash flows in a few clicks. If you are new to free cash flow analysis, here’s an example of the cash flow template from which you might benefit.


Accounting Software


A company may have a big budget or deal with complex financing in many ways. Spreadsheets or accounting software may handle much of the intricacy for you. Once all your financial reports are set up in MoolahMore, this info is just one click away. 


Large businesses hire teams of financial planning and analysis (FP&A) experts whose job is to exhaust in detail the details of company financials in search of the patterns that allow better results. The availability of an ERP alongside the process makes it very easy for people to delegate some of these tasks.


Both large and small businesses should strive to maintain a healthy cash flow. With dispensary MoolahMore, financial management tools will help you discover more about your company’s cash position and precise reporting with machine learning and AI-driven analysis of all financial situations.




Sophisticated investors would not buy the stock of a company without first reviewing its financial statements, including cash flow. A more detailed cash flow analysis initiated with ERP and advanced accounting will help businesses to understand the financial health and future performance of their company. To stay on top of an organization’s financial performance, business owners, managers, and executives should compare data that is similar on an ongoing basis to achieve this mission’s short and long-term goals.


Cash flow and cash flow analysis are important for virtually every company. Operating your company without cash flow knowledge is like flying blind; don’t operate your business without updated, accurate cash flow data.


With that said, leading people in business use MoolahMore as their first crucial tool, such as their budgeting or accounting software. This platform also enables them to enhance their analytical skills using spreadsheets. Download now!


MoolahMore helps people manage their finances more efficiently and make better financial decisions in the process.