Managing Cash Flow

CHAPTER 9
Controlling and Analyzing Cash Flow
CONTROL CASH BEFORE IT’S TOO LATE.
Cash flow analysis is less frequently done than profit analysis, cost analysis,
budgeting analysis, capital investment analysis, and various other analyses.
Among the reasons may be that:
• Cash flow has only relatively recently become accepted as a specific element
to be measured and recorded in the financial statements and as a significant
criterion of corporate financial success or failure.
• Analytical techniques for cash flow are not yet part of the standardized
package of accounting tools.
Cash flow analysis refers to the tools and techniques that assist in understanding
the company’s present and future cash position. In this chapter, we will first take
a brief look at the basic elements of FASB 95, Statement of Cash Flows. Then we
will discuss the following cash flow analysis tools:
• Cash flow projections as they relate to FASB 95
• Cash flow reporting and control
• Interpretation and analysis of cash flow
BRIEF LOOK AT FASB 95
FASB 95 ESTABLISHES THE FORMAT
FOR EXTERNAL DOCUMENTS;
THE COMPANY NEEDS TO ESTABLISH
THE FORMAT FOR INTERNAL DOCUMENTS.
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