Join Rudolph Rosenberg for an in-depth discussion in this video Negative cash flow is not always bad news, part of Financial Literacy: Reading Financial Reports.
- [Voiceover] I'm sure we will all agree…that more cash is better.…And when we read a cash flow statement,…we can be tempted to view a negative cash flow as bad news.…We need to be careful not to make hasty conclusions.…As we have already seen, the cash flow of a company…is made up of many in-flows and out-flows of cash.…When a company invests in its future…by purchasing machinery, property, patents…or even other companies,…it can be spending a lot of cash to do so.…This will, therefore, reduce the cash position…of the company and could create a negative cash flow.…
In that case, it's clear that it is negative cash today…due to an investment that is expected…to bring more cash in the future…than if the investment was not made.…In this case, a negative cash flow…is far from being bad news.…It's, therefore, very important to look in detail…into the cash flow statement categories…to understand the source of a reduction…or of a negative cash flow.…If it is due to the operations of the business,…then it could be critical to the survival of the company.…
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- What is a financial statement?
- Reading the balance sheet
- Understanding depreciation, liabilities, and equity
- Reading the income statement
- Understanding revenue, costs, profitability, and net income
- How cash flow works
- Analyzing financial documents with context<br><br>
- The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.
Skill Level Appropriate for all
1. Financial Statements
2. The Balance Sheet
3. The Income Statement
4. The Cash Flow Statement
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