Which financial statement is used to guide the day to day operations of a business?


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Deborah Mann Profile
Deborah Mann answered
Probably a cash flow statement. There are four different types of main financial statements and they all have a different purpose. They are balance sheets, income statements, statements of shareholder equity and cash flow statements.

  • Balance sheets
A balance sheet shows exactly what it is that a company owns, and how much it owes at any particular time.

  • Income statements
An income statement will show how much money has been made and how much it has spent over a particular period.

  • Statements of shareholders' equity
A statement of shareholders' equity shows the changes that have been made in the interests of the company's shareholders over a given period of time

  • Cash flow statements
Cash flow statements, which are the ones that you are interested in, show how much cash a company is generating and how much is available at any given time. This is vital to the success of any business and is responsible for the downfall of many.

Anyone who is in business should be aware on a daily basis exactly what their cash flow is and should be working actively to make sure that it is as healthy as possible. This means things like making sure that the bank that you use does not take more than two days to clear a check, and that you bank checks on the day that they are received.

It is no good having money on the face of it, but not being able to access it when it is needed. It should also be remembered that a cash flow balance and a bank balance are completely different things.

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