Business Tools Blog

Jerry Maguire and Rod Tidwell understood the importance of cash flow.

Jerry Maguire: Yeah, what can I do for you, Rod? You just tell me what can I do for you?
Rod Tidwell: It’s something very personal, a very important thing. Hell! It’s a family motto. Are you ready Jerry? I wanna make sure you’re ready, brother. Here it is: Show me the money. SHOW! ME! THE! MONEY! Jerry, it is such a pleasure to say that! Say it with me one time, Jerry.
Jerry Maguire: Show you the money.
Rod Tidwell: No, no. You can do better than that! I want you to say it brother with meaning! Hey, I got Bob Sugar on the other line I bet you he can say it!
Jerry Maguire: Ye, ye, no, no, no. Show you the money.
Rod Tidwell: No! Not show you! Show me the money!
Jerry Maguire: Show me the money!
Rod Tidwell: Yeah! Louder!
Jerry Maguire: Show me the money!
Rod Tidwell: I need to feel you Jerry!
Jerry Maguire: Show me the money! Show me the money!

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A cash flow statement measures the cash flow from operations, investing and financing.  No new concepts are introduced in the cash flow statement.  Each line is either pulled directly from the income statement or calculated based on the balance sheet.

The cash flow from Assets is calculated by subtracting this month’s balance from last month’s balance.  For example, you owned $500 of fixed assets last month and purchased an additional $100 of fixed assets this month.   This month’s fixed asset balance is $500+$100= $600.  The cash flow calculation is $500-$600=-$100.  Your cash went down by $100 between last month and this month.

The cash flow from Liabilities is calculated by subtracting last month’s balance from this month’s balance. (the opposite of the calculation for Assets)  For example, your A/P last month was $200, at the end of this month your A/P was $300. The cash flow calculation is $300-$200=$100.  Your cash increased by $100 between last month and this month.

The following example show’s each calculation on the cash flow statement: