The cash flow statement is a report of results on a cash basis. It is arguably the most important statement, although it is not prepared as frequently as the balance sheet or income statement.
Cash is the lifeblood of any organization. Many promising businesses have been forced into bankruptcy due to lack of cash. In fact, companies fail when they run out of cash — not when they run net losses. A business can operate without profits; it can’t run without cash.
By the same token, profit is not cash in the bank. Businesses can show great profits but can run out of cash by sending it out faster than they bring it in! This means that companies can be successful at controlling expenses but are not watching the checkbook.
A cash flow statement is included in any complete set of audited financial statements. Generally accepted accounting principles (GAAP) require that the cash flow statement be in a prescribed format which is included in the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 230, Statement of Cash Flows.
The cash flow statement, as the primary cash reporting tool, is a good starting point for cash flow analysis during the lending process. Its primary purpose is to measure changes in cash and cash equivalents from one balance sheet date to the next.
The cash flow statement is critical because cash flow represents the lifeblood of any business. While a business can continue to operate with losses on the income statement, it will fail if sufficient cash inflow cannot be generated to cover required cash outflows. Payroll, loan payments, and vendor invoices cannot be covered with accounting profits — they can only be covered by cash flow.
While CPA-prepared financial reports include a cash flow statement, internal management reports may not, making the credit analyst’s job more challenging.
Please join Gary Deutsch, CPA MBA, as he discusses how credit analysts can use a prospective borrower’s cash flow statement to assess loan risk and assist with the lending decision-making process. This material can be helpful to new credit analysts as well as a refresher for more experienced analysts.
WHAT YOU’LL LEARN
In this informative webinar, we will cover:
The GAAP Cash Flow Statement
- Operating Activity Cash Flows
- Investing Activity Cash Flows
- Financing Activity Cash Flows
Calculating and Analyzing Cash Flows
- Potential Errors with Accounts Receivable and Non-Cash Expenses
- Other Potential Problems in Calculating and Analyzing Cash Flows
- Assessing the Quantity of Cash Flows
- Assessing the Quality of Cash Flows
Additional Cash Flow Statement Analysis
- Alternate Cash Flow Statements — Sources and Uses Approach
- Alternate Cash Flow Statements — Checkbook Approach
- Alternate Cash Flow Statements — Income Statement Spread Approach
- Potential Cash Flow Statement Warning Signals
- The Seven Cash Flow Drivers
- The Cash Flow Statement and Ratio Analysis
- Free Cash Flow — a Popular but Inconsistently Defined Term
- The Cash Flow Statement vs. the Concept of EBITDA
AND MUCH MORE!
YOUR CONFERENCE LEADER
Your conference leader for “The Cash Flow Statement – Back to Basics” is Gary Deutsch, president, BRT Publications LLC. Mr. Deutsch is a licensed CPA in Maryland and has a B.A. in accounting and an MBA in finance from Loyola University Maryland. He has also achieved the Certified Management Accountant, Certified Internal Auditor and Certified Bank Auditor designations. Mr. Deutsch is the founder and president of BRT Publications LLC. Mr. Deutsch has trained thousands of financial institution professionals in all aspects of risk management and has written numerous books in the U.S. and Europe on topics such as credit risk, internal audit and compliance with Generally Accepted Accounting Principles. Mr. Deutsch has extensive risk management and internal audit experience through his association with financial institutions of all sizes as well as through his role leading the KPMG financial institution consulting practice in the Mid-Atlantic region.
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