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Module 10: Cash Flow Preparation and Use

Now, let's explore how companies Manage Cash Flow.

Most companies use the revenues generated yesterday to
pay today's and tomorrow's expenses.

Some companies manage their cash and maintain enough
reserves to pay their expenses when they are due.

Others must obtain capital loans to pay their bills, because
they have highly seasonal sales or experience rapid growth
and do not have enough savings to pay for the upfront costs
to fund their expansion.

While the company's income statement and balance sheet
help monitor performance and their current financial
condition, neither statement provides information about

cash activity during a given time period.

Companies must manage their cash wisely to accommodate
the “lag time” between revenues and expenses, so they can

pay their bills in a timely manner.

In this unit, we focus on how to prepare a statement of cash
flows, which will provide important information about

performance measures, cash-on-hand, and cash needed.