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Money Smarts
Chapter 18 Money Smarts: Managing Cash Flow
The three financial statements prepared
by a business are the income statement, the balance sheet,
and the statement of cash flows. The income statement
is a report of net income or net loss for an accounting period.
It is sometimes called a profit and loss statement.
The balance sheet reports the assets (what is owned) and the
liabilities (what is owed) at a specific point in time. The
statement of cash flows shows the sources and uses
of cash during an accounting period.
SCORE® “Counselors
to America’s Small Business” is a nonprofit association
that provides guidance to small businesses nationwide. Go
to SCORE’s 60-Second
Guide to Managing Cash Flow.
Read the article and answer the following
questions.
- What is meant by the term “cash flow”?
- What is meant by the term “cash inflow”?
Where does this cash come from?
- What is meant by the term “cash outflow”?
Give some examples of cash outflows.
- Why is it important to project cash inflows and outflows?
- Why is the income statement used in managing cash flows?
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