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A successful investment campaign for your growing company will include pitching your firm to the right investors or lenders. And part of convincing those people to invest their cash in your company is presenting them with a succinct and promising business plan. The first two parts of this article discussed the income statement and balance sheet, and this last part goes over the importance of the cash flow statement.

A cash flow statement tracks how your company generates and uses cash during a given period of time (i.e. a month, quarter, or year). The income statement and balance sheets tell the venture capitalists and lenders how much your business makes and spends, while the cash flow statement explains how you make and spend that money, as well as laying out your bottom line.

Within your cash flow statement, there should be three, possibly four categories to include. The first is operating activities, which is how your company makes and uses money from its primary function. The second is investing activities, including purchases and sales of long-term investments, properties or equipment. The third category is financing activities, meaning the purchase and sales of the company’s own stocks and bonds. Additionally there may be some supplemental information to include, like the amounts of your income taxes and loan interest as well an any other non-cash exchanges.

Venture capitalists and bank lenders sometimes skip to the back of a business plan first because the cash flow statement can reveal so much about the fundamentals of a company. Investors can see at once if and how your firm is making money. It makes it easy to determine if your firm is in a position to grow or if it is spinning its wheels.

With an income statement, balance sheet and cash flow statement, your basic business plan is complete. Further information may be needed on a case-by-case basis depending on who your investors are, but with these three in hand, you will have a solid foundation upon which to attract business financing for your company.


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