| The cash flow statement is simply a projection of cash inflows and outflows. This
statement allows business owners to understand the cash position and to know when to borrow money to meet obligations or invest money because of excessive cash flow. Proceeding month-by-month you can estimate when you will need to borrow and how much. A franchisor should always be concerned about the relationship between sources of funds and application of funds. The cash flow statement covers a period of time and it reflects the increases or decreases in the cash position of the business. The cash flow statement is divided into four major areas:
1. cash receipts - the total of all receipts yields the total cash available
2. cash disbursements - reflect all expenditures of the business for that time period
3. net cash flow - result of subtracting the disbursements from the receipts
4. accumulative cash flow - shows us how much cash we have on hand for a longer period of time
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