Cash flow is the dollar change in the bank account at the end of the accounting cycle (period). It is primarily attributed to the earnings from operations adding back some non-cash expenses such as depreciation and amortization. Any changes in the current assets or current liabilities section is included in the formula.
Other contributing elements to cash flow include investments and financing.
The price to cash flow ratio is a valuation tool used to assist buyers and sellers of stock in determining timing of purchases or the disposition of shares. Unlike the other valuation ratios, this particular ratio utilizes the cash flows statement in determining the outcome. The formula is simple:
Price to Cash Flow = $Market Price of a Share of Stock/Cash Flow in Dollars Per Share of Stock
There are many different types of bank loans, each having their own respective purpose. All bank loans are categorized into two distinct groupings; secured and unsecured loans. Within in each category of loans there are several different sub-types of bank notes used to make a loan. Both categories require the owner of the small business to provide a personal guarantee to ensure the loan is paid back.
Accrual accounting is the preferred method of accounting for all business operations. Any publicly traded company must comply with the principles of accrual accounting. Small business operations can choose between cash and accrual accounting for their records. Although cash accounting is the easiest to work with as a small business operation, accrual accounting will provide a more accurate picture of the financial status and affairs of any business operation.
A construction draw schedule is a financial tool used by contractors in identifying percentage of completion points in the project for the bank to advance proceeds to the contractor. The construction draw schedule is instrumental in keeping the project moving along.
Cash flow is the ability of a business to turn its product or service into cash. It is generally measured in dollars or in dollars against a time period. The simplest example I can think of is a child selling lemonade.
For any small business operation, getting cash into the bank account is critical to survival. Without cash, the probability of success dissipates quickly. How do you get cash into the bank account? There are several sources of cash: they include capital, loans and customer payments.
