You may be making a profit – that is a great start. But are you making enough to pay dividends as well as pay off your long term debts? Do you have enough cash to invest in future improvements?
Many people look at their income and balance sheet at least on a monthly basis – but not many spend time looking at their cash flow statement. Often this is because their accounting system does not automatically
provide it, or they don’t understand what they are looking at. It is important you take the time to get familiar with the cash flow statement as it can tell you some very useful
* How well you turn profits into cash
* How well placed you are to invest in future improvements
* Whether you are running your assets into the ground
* Your ability to generate enough cash to pay dividends and also pay off long-term debt
This resource provides guidance on how to analyse this statement and also warnings and tips to look out for.