Fundamentals of Business

Keeping the records - Financial documents

There are three important documents
I. Cash (funds) flow
Benefits from using Cash flow the cash flow statement is one of the four main financial statements of a company. The cash flow statement can be examined to determine the shor short term sustainability of a company company. If cash is increasing (and operational cash flow is positive), then a company will often be deemed to be healthy in the short term. Increasing or stable cash balances suggest that a company is able to meet its cash needs, and remain solvent. For instance, a company may be generating profit, but still have difficulty in remaining solvent.

Therefore £40,000 is available for investment and other activities; it is the net cash flow. An enterprise has to pay trade creditors before anyone else and then pay for other costs.
Therefore
Net cash flow = Accounts receivable - (Accounts payable + other costs)