In order to prepare a Statement of Cash Flows as a part of financial statement analysis, the small business owner must have information from both the income statement and the balance sheet for the firm. The primary information needed from the income statement is net income (or loss) and depreciation as both are considered cash flows to the firm.
More information is needed from the balance sheet in order to practice cash flow analysis. The owner must look at the last two years of the firm's balance sheets and compare the differences between the two in order to develop the Statement of Cash Flows. The table below gives you sample Comparative Balance Sheets for a firm. With sample information from an income statement and the information from these comparative balance sheets, you can develop your Statement of Cash Flows.
| XYZ Company Comparative Balance Sheets | ||
| Assets | Year-End 2008 | Year-End 2009 |
| Cash | $ 30,000 | $ 40,000 |
| Marketable Sec | 10,000 | 10,000 |
| Accts Rec | 170,000 | 200,000 |
| Inventory | 160,000 | 180,000 |
| Prepaid Exp | 30,000 | 20,000 |
| Investments | 20,000 | 50,000 |
| Plant & Equipment | 1,000,000 | 1,100,000 |
| Less Acc Depreciation | 550,000 | 600,000 |
| Net Plant & Equipment | 450,000 | 500,000 |
| Total Assets | 870,000 | 1,000,000 |
| Liabilities and Owner's Capital | ||
| Accts Pay | 45,000 | 80,000 |
| ST Bank Loans | 100,000 | 100,000 |
| Accrued Exp | 35,000 | 30,000 |
| LT Bank Loans | 40,000 | 90,000 |
| Owners Capital | 650,000 | 700,000 |
| Total Liabilities and Capital | 870,000 | 1,000,000 |
