Reading your cash flow statement is simpler than it might seem, and this guide will walk you through it.
If you haven’t yet read our article How to Read Your Cash Flow Chart, we recommend starting there for a solid foundation. This article builds on that example using the same data to explore the cash flow statement.
In our previous example, we showed a business that ran out of cash before the end of its second month. In the cash flow statement below, we’ll see how this situation is reflected in the financial details.
Key Points to Note:
Rolling Balances – Notice how the ending balance of one month becomes the beginning balance of the next. In this example, the negative ending balance in Month 2 shows that the business’s bank account dipped below zero, leaving it with a debt of $5,900.
Ongoing Losses – Just like in the chart, the cash flow statement reflects ongoing losses, showing that this business continues to operate at a deficit for several months.
Understanding your cash flow statement can help you see patterns in your cash flow over time and spot financial issues early. We hope this guide makes it easier to interpret your financial data and make more informed decisions!