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.
What is Cash Flow?
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.
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.