Let’s learn about cash flow statement in this informational video by Vishal Thakkar, our Finance Guru. This video will make sure your get an idea about cash flow statement.
Ladies and gentlemen boys and girls we shall tucker again your finance guru and this time the topic of discussion is the most sacrosanct topic in the world robert kiyosaki a well-known author of various books including the most famous rich dad poor dad has said that if you understand cash flow statement you will never be poor for life now if cash flow statement is
So very important why is it not taught in schools or colleges in fact current education system across the world does not teach people about money or cash flow and i am here to fathom the reason why probably they think money is the root of all evil or something i don’t know however not knowing cash flow can be seriously hazardous to your financial health so here we
Go today in very brief i will explain what cash flow is and how cash flow works friends in my best-selling book finance for non finance there is a complete chapter dedicated to cash flow where i have very loosely explained that cash flow is a function of human activities and the same parallel is drawn in case of a company so when a company prepares a cash flow it
Looks at the activities which are carried on by its people inside the organization so now there are so many activities which are carried out however we focus on three primary activities which decides whether the cash is flowing in or cash is going out and what happens when cash flows from these three activities so which are these three activities activity number
One financing activity activity number two investing activity and activity number three operating activity so let us understand how money flows when he comes in and money goes out from each of these activities so if we talk about financing activities there are certain transactions which a company does with people who finance the enterprise so correctly owners and
Lenders are the primary people who transact with the enterprise and who when they given money or when they take out money those activities could be safely classified as financing activities so if i were to give you example it could be capital introduction it could be taking off a loan by the company it could be repayment of capital it could be repayment of loan
Or it could be interest paid to the lender so these are the five crisp examples of financing activities of which first two are predominantly cash inflows because capital introduction means money coming into the enterprise taking off a loan also means money coming into the enterprise but if you look at the blast three they are predominantly cash outflows capital
Repayment to the owner loan repaid to the lender or interest paid to the lender incidentally the six example also could be dividend paid to the shareholder that is also one of the primary cash outflows under financing activity let’s go to the next one investing activity so investing activity as the name correctly suggests mostly has cash outflows but also sometimes
Has cash inflows we’re all affirm invests a forms usually invests in purchasing fixed assets or investing surplus money in areas where the money may remain safe and on something more so let’s look at fixed assets any cash outflow in buying new assets be it land building plant machinery furniture fixtures vehicles would classify as a cash outflow from investing
Activity when you sell an asset and you recover some money that would be a nominal cash in duluth if you talk about investments investing in shares mutual funds fixed deposits bonds etc are cash outflows from investing activities and when you redeem those or when you earn interest or dividend out of those those are cash inflows from investing activities now finally
Let’s go to operating activities operating activities are related to day-to-day operations of business so all your are revenue transactions for difference between capital and revenue there is another video which you can go through but for revenue transactions like money paid for rent salary day-to-day expenses electricity internet connection etc etc are all cash
Outflow from operations cash inflow would include the money received from sale of goods or services so these are predominantly operating activities but apart from revenue and expense transaction all your working capital items like changes in stock changes in debtors changes in creditors changes in your bank balances they also are a part of operations so every me
When it prepares a cash flow statement it factors cash inflows and outflows from all the three activities to that they will compare the opening and the closing cash balance to make a statement wherein a reader of cash flow statement would come to know that we’re all money has come in and we’re all money has gone in fact if you look at your own personal cash flow
Statement your activities will decide where money comes from and where money goes so if you are an employee your money comes from salary if you are a businessman your money comes from profit if you are a philanthropist your money comes from donations and grants and also the type of nature or hobbies or passions you possess beside your cash outflows so if you look
At your expense tracker software of your credit card and if you see there are lot many swipes happening for wine and dine then it clearly shows that you are more into partying activity if a lot of outflows are seen on apparels and shopping malls then it shows that you are a person with a lot of shopping therapy activity so basically your activities decide your
Cash flow and once you master the art of reading cash flows as robert kiyosaki says you will never be poor all the best keep watching our videos and don’t forget to subscribe our channel financed you we all know that people from non finance background struggle to manage their finances they hid the reality when they get their first paycheck and from then on they
Are all by themselves to manage their money on their own for lifetime it’s like asking you to fly a plane without any formal training it’s very risky so our end ever through our books our videos and all other mediums to educate you financially so that you don’t outsource managing your own finances to somebody else and suffer because of inefficiencies of other
People some of the best sellers and fourth position on the best seller list finance for non finance yes ladies and gentlemen i’m gonna give you some legal tips on how to say tax
Transcribed from video
Cash Flow Statement | Vishal Thakkar By Finance Tube