Statement of Cash Flows Barbara Clemenson, CPA, CFRE

Clemenson - Statement of Cash Flows © 2 Overview Show me the Cash!!!!!! The other financial statements give us a picture of what the organization owns, owes and is worth [Balance Sheet] and what it makes and spends [Income Statement and Statement of Functional Expenses]

Clemenson - Statement of Cash Flows © 3 Overview Show me the Cash!!!!!! But we know because of accruals, except for the “Cash and Cash Equivalents” on the Balance Sheet, we really don’t know how much the organization made or spent in cash, or how it spent that cash.

Clemenson - Statement of Cash Flows © 4 Overview Show me the Cash!!!!!! The Statement of Cash Flows gives us that critical information!

Clemenson - Statement of Cash Flows © 5 How the Statement of Cash Flows is Organized Cash Flow Statement divide what the organization does into three parts: Cash Flows from Operating Activities – This is what the organization does for a living. It should have positive cash flow from what it does. Cash Flows from Investing Activities – This is how it is using its assets. Cash Flows from Financing Activities – This is how it is using its liabilities and net assets.

Clemenson - Statement of Cash Flows © 6 Denver Rescue Mission Operating Activities – Regular income and Expenses Investing Activities – Buy or Selling Assets Financing Activities – Obtaining or Paying Back Loans Net Increase (Decrease) in Cash

Clemenson - Statement of Cash Flows © 7 What is important to note First of all, is Cash and Cash Equivalents increasing or decreasing overall? Does this make sense with what you know about the organization? Are they at a sustainable level with their cash? I.e., Can they pay their bills? Do they have enough to weather bad times?

Clemenson - Statement of Cash Flows © 8 Denver Rescue Mission Denver Rescue Mission spent more cash than it took in in 2005 [left hand column], but took in more cash than it spent in 2004 [right hand column]. As of the end of its 2005 fiscal year, it had $1,581,891 in cash.

Clemenson - Statement of Cash Flows © 9 What is important to note Second, are they making money in Operations, or are they financing their Operations in other ways? Once assets are sold, they are gone and can no longer be used to generate income or provide services. What is their level of debt, and is that increasing or decreasing? How will that affect their long-term operations and sustainability?

Clemenson - Statement of Cash Flows © 10 Denver Rescue Mission Denver made money in operations both years.

Clemenson - Statement of Cash Flows © 11 Denver Rescue Mission Denver spent more money[ ($XX) = negative numbers] on assets in 2005 than it gained in selling assets [ $XX = positive numbers]. They sold more assets in 2004 than they bought. Most of the times, organization’s investing cash flow will be negative because they’ll be buying assets.

Clemenson - Statement of Cash Flows © 12 Denver Rescue Mission Denver borrowed more money than it paid back in loan in 2005 [ $XX = positive number]. In 2004 it paid back a debt and did not borrow anything [ ($XX) = negative number.

Clemenson - Statement of Cash Flows © 13 Denver Rescue Mission Overall, the Denver Rescue Mission spent more cash than it took in in 2005, but took in more cash than it spent in It still have over $1.5 million in cash left over. It could spend more than it took in this year, because they had build up previous profits!!!!!

Clemenson - Statement of Cash Flows © 14 Summary The Statement of Cash Flows provides us with information not found in any other statement: How the organization is making or spending actual cash. How that type of income and spending will affect the organization in the long term.