![]() ![]() ![]() They also used $45,000 to purchase new equipment, and the owner took out $35,000 as a draw from the company, which left only $5,000 in the bank at the end of the year. These non-cash transactions result in a cash basis income of only $75,000 for the period. ![]() To explain in greater detail, although Company A was profitable, they still had $75,000 uncollected from their customers and owed vendors $25,000 at the end of the year. ![]() As you’ll see in the chart below:Ĭash from operating activities: $75,000 +(-) Cash from investing activities: $45,000 +(-) Cash from financing activities $35,000 + Beginning cash balance: $10,000 = Ending cash balance: $5,000 We can use the cash flow formula to get a better sense of why this is the case and illustrate the difference between cash flow vs. Let’s look at an example: Company A has $125,000 of annual profit but only $5,000 in the bank at the end of the year.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |