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Cash Flow

Cash Flow. Damona Doye OSU Extension Economist damona.doye@okstate.edu 405-744-9836. Financial Statements. Cash flow statement Cash income Cash expenses. Balance sheet Assets Liabilities Net worth (owner equity). Income statement Cash income Cash expenses Changes in assets

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Cash Flow

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  1. Cash Flow Damona Doye OSU Extension Economist damona.doye@okstate.edu 405-744-9836

  2. Financial Statements Cash flow statement • Cash income • Cash expenses Balance sheet • Assets • Liabilities • Net worth (owner equity) Income statement • Cash income • Cash expenses • Changes in assets • Changes in liabilities • Net farm income, accrual adjusted (profit) AGEC- 751 AGEC- 753 AGEC-791 792 752 http://pods.dasnr.okstate.edu/docushare/

  3. Cash Flow Discussion • Statement versus plan, business versus personal • Sources of information • Cash flow statement development • Uses of cash flow statement or plan • Relationship to other financial statements

  4. Sources of Information • Records, records, records • Receipts, bills, invoices, etc. • Account statements • Transaction logs • Computer files

  5. Cash Inflows Operating receipts Crop and livestock sales, government payments, other farm income Capital sales Contributed capital Cash Outflows Operating expenses (feed, fertilizer, etc.) Capital purchases Family living and other withdrawals Cash Flow Statement

  6. Quicken Reports and Graphs • Cash flow • Tax schedule • Transactions • Account balances • Comparison • Filtered • Memorized • Balance sheet

  7. Uses of a Cash Flow Statement • Establishes target levels for income and expenses which can be used in monitoring progress towards goals • Budget • Break even analysis • Points out potential problems in meeting financial obligations • Indicates when cash is available for new investments • Risk assessment

  8. Measuring Financial Position and Performance • Liquidity • Ability to pay bills as they come due and cover unanticipated events • Solvency • Ability to cover all debts if the business were sold • Profitability • Returns to labor and management generated by the operation • Financial efficiency • Efficiency with which assets generate income • Repayment capacity • Ability to repay term debt in a timely fashion

  9. Financial Statements Cash flow statement • Cash income • Cash expenses Balance sheet • Assets • Liabilities • Net worth (owner equity) Income statement • Cash income • Cash expenses • Changes in assets • Changes in liabilities • Net farm income, accrual adjusted (profit) AGEC- 751 AGEC- 753 AGEC-791 792 752 http://pods.dasnr.okstate.edu/docushare/

  10. Difference Between Cash Flow and Income Statement Cash flow statement does not include: • Depreciation • Changes in inventory, other accrual adjustments • Gains/losses on capital asset sales Income statement does not include: • Capital sales and contributed capital • Principal payments • Family living expenses

  11. References • At osufacts.okstate.edu: • Developing a Cash Flow Plan, AGEC-751  •  From Cash Records to Cost of Production, AGEC-242 • Budgets: Their Use in Farm Management, AGEC-139 • Quicken for Farm and Ranch Financial Records, CR-324  • Quicken or QuickBooks: What’s the Best Choice for Agricultural Producers? AGEC-266 •  Information Systems for Oklahoma Farmers, AGEC-302 • FINPACK, https://www.cffm.umn.edu/FINPACK/

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