A 12 Month Cash Flow Statement is a financial statement that shows the impact on cash and cash equivalents because of the changes in the balance sheet and income for a period of 12 months. The analysis is broken down into investing, financing and operations. These statement templates that are provided here can provide you with more information.
6+ 12 Month Cash Flow Statement Templates in PDF
1. 12 Month Cash Flow Statement Template
2. 12 Month Cash Flow Objectives Statement Template
3. 12 Month Cash Flow Statement Sample
4. 12 Month Projected Cash Flow Statement Template
5. 12 Month Cash Flow Statement Preparation Template
6. 12 Monthly Cash Flow Projections Statement Template
7. 12 Month Cash Flow Financial Statements Template
How to Prepare a 12 Month Cash Flow Statement?
There are two methods with which a cash flow statement can be prepared:
- Indirect Method
- Direct Method
The Indirect Method:-
Step 1: Operating Activities
The cashflow for this is calculated in two stages. In the first stage, the operating profit is calculated before any changes made in the working capital. And in the second stage, the changes in the working capital such as changes in the assets and liabilities are calculated.
To sum up, the profit, increase in current liabilities and decrease in current assets are added up and then from it at first the increase in current assets is substracted and then from the value, the decrease in current liabilities is subtracted.
Step 2: Investing Activities
In this case, the cashflow id derived from the addition of cash inflow from the sales made or the maturity of the assets and then subtracting the cash outflow due to investment or purchase of new fixed assets.
Step 3: Financing Activities
In this case, the cash flow is calculated by calculating the cash paid for the non-current or long-term liabilities and shareholder’s capital.
The Direct Method:-
The direct method is more or less the same as the indirect method but only differs in the way of presentation. Whereas in the indirect method the calculation is divided into three different stages. For the direct method, everything is calculated together putting them in a single chart.
How Will You Know If the Statement of Cashflow is Correct or Not?
The accuracy can be verified by comparing the changes in cash with the changes mentioned in the balance sheet.
1. Take the amount of net increase or decrease in cash whichever is there in the balance sheet. Turn it into an amount from the percentage state.
3. Subtract the previous from the current one to get the change in cash.
4. If the amount is positive then there is an increase and if the amount is negative then there is a decrease in the cash.
5. Compare this amount with the amount you got from the balance sheet that is the increase io decrease in the cash.
6. If both are same then there is no error but in case there are different that means there is an error.
Why is a 12 Month Cash Flow Statement prepared?
A cash flow statement gives the amount of transaction that is done with cash during the accounting period. It is a record of all the usage of cash. A cash flow statement can help in the formulation of business strategies. If there is a negative amount in the statement then the company needs to cut down on the expenses.
Therefore a cash flow statement works as an alert for the company’s cash consumption. If the company has a lot of cash they can invest them for the right purpose.
State the Limitations of a Cash Flow Statement?
There are six major limitations of the Cash Flow Statement:
1. No Mention of Net Income
1. There is no mention of the net income because the non-cash items are not considered when you draft a cash flow statement.
2. No Assessment of Liquidity and Solvency Position
1. You will only get the information about the cash flow. There is no mention of the liquidity position because you will only get the cash position. Therefore you are unable to get the solvency position that is the ability to pay the debts.
3. Not a Fund Flow Statement or an Income Statment Substitute
1. You won’t be able to find the information that is there in an income statement or a fund flow statement. In the cash flow statement, you will only get information related to the inflow and outflow of cash.
4. Cannot Assess the Profit
1. Cash flow considers neither the cost or the revenue. Therefore you cannot assess the profit that the firm has incurred.
5. Does Not Give the Future Estimation
1. You will only get the previous amount and the current amount for the time period. This statement does not give you the estimation of the future cash flow of the firm.
6. Nil Chances of Comparison
1. With the information on the cash flow statement, you cannot compare the two firms and there worth. The cash flow statement can’t demonstrate the difference between the two firms’ market worth.
Article At a Glance!
- Introduction to the world of Cashflow statement
- Methods that can help you prepare a perfect cash flow statement.
- How accurate is your cash flow statement?
- The limitation you may come across.