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Level 3 Business

In: Business and Management

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What is the purpose of a cash flow statement?
The primary purpose of a cash flow statement is to provide information about cash receipts, cash payments, and the net change in cash resulting from the operating, investing, and financing activities of a company during the period. . Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet
Operating Activities
This tells how much income you make over the year and from this you can tell if you have a good cash flow and this is how you tell if you can get a loan from the bank because if you have a good cash flow then the bank will accept this with open arms and look to make money back in the process. Also, you can look at attracting investors instead of getting a loan this may work out cheaper for you. Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. A healthy cash flow means that you can pay for these.
Financing Activities
If the business has a healthy cash flow then they will be able to get a loan from the bank. Then the bank will look to make more money because they know the business can pay this back if they have a healthy cash flow statement for example if the company ask for £1,000,000 then the bank may look at this and say we will offer you £2,000,000 then this means the bank will make a profit back because of the interest on the money. Other sources of finance grants, finance, loans, business support eg mentoring, consultancy, funding for small and medium-sized businesses and start-ups
Investing Activities
This is how you spend your money. This tells you how much

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