Overview of Cash Flow Analysis

Ronald St Facile is an experienced accountant who graduated from North Eastern University. A senior accountant at Infinitte, LLC, Ronald St Facile performs cash flow analysis.

Cash flow is made up of cash and equivalents that a business spends or generates over a period of time. There are three types: cash flow from operating, investing, and financing activities.

Cash flow from operating activities is generated from customers minus what is spent on expenses such as salaries, utilities, or rent. Investing activities cash flow measures money spent on long-term financial instruments and fixed assets. In finance activities, funds are received from owners, investors, or sponsors.

A cash flow analysis determines the state of the business, the liquidity, and the solvency of the business. Therefore, cash flow analysis is essential to the business, as it reveals the balances and financial health, profitability, and sustainability. A cash flow statement can be achieved through a search on the firm’s balance sheets for the last two years. That implies comparing the difference between the years, income statements, profits or losses, and assets or liabilities that changed over time.