Page 102 - Finance for Non-Financial Managers

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6

The Cash Flow

Statement:

Tracking the King

e’ve examined the income statement in some detail in the
Wpreceding chapters. We’ve noted its importance in meas-
uring the performance of an organization, and its familiarity as
the financial statement most readily recognized and understood
by nonfinancial folks. We should also note its shortcomings as
the sole report card on financial operations, perhaps most
importantly:
• It doesn’t report on all the transactions that occur in a
company unless they have an immediate impact on profit
or loss. Many transactions without such immediate profit
and loss impact can be for big dollars, such as buying
new equipment for the plant or borrowing money from the
bank.
• It doesn’t explain why the net profit on the income state-
ment never appears as an actual improvement to the
company’s bank balance.
• It doesn’t give growing companies a tool to manage their
most scarce resource, cash to finance growth.

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