3.8 The Cash Flow Statement

The components of a cash flow statement and how stakeholders use it.

Transcript (166 lines)

0:00 It is a Friday in February at Steep Street Boba, and the whiteboard by the sealing
0:04 machine has read sixty-some cups a day all month, on pace for eighteen hundred,
0:10 the trough of the shop's year.
0:13 The income statement says this business earns about thirty-four thousand dollars
0:17 of profit a year.
0:18 Both numbers are true, and neither one pays Priya, whose wages clear today.
0:24 By the end of this month, four thousand one hundred more dollars will have left
0:28 the drawer than entered it, and Cami will cover the gap without borrowing a cent,
0:33 because this exact Friday was paid for last July.
0:36 The statement that explains how is the last of the three.
0:40 I'm Logan Shaffer, and this is MAMAKO's AP Business,
0:44 Topic 3.8: The Cash Flow Statement.
0:47 Two skills by the end: name the cash inflows and outflows that move a
0:52 business's cash balance across a reporting period, and explain how lenders and
0:56 owners read a cash flow statement to judge whether a profitable business can
1:00 actually pay its bills.
1:02 Practice questions for this topic are in the next video.
1:05 Let's go.
1:08 A cash flow statement shows how cash inflows and cash outflows changed a
1:12 business's cash balance over a reporting period, opening balance to closing
1:16 balance. The period is whatever span the business tracks: Cami builds hers monthly,
1:22 and public corporations publish theirs quarterly and annually.
1:26 It is the third tab in the shop's stack.
1:29 The income statement from Topic 3.6 measured profit across a period.
1:34 The balance sheet from Topic 3.7 froze one instant and listed what the shop owns and
1:39 owes.
1:40 The cash flow statement follows the money itself, and the gap between it and the
1:44 income statement is timing.
1:47 When Cami caters a graduation and the family pays the invoice thirty days later,
1:51 the income statement records revenue the day she pours;
1:55 the cash flow statement records nothing until the check clears.
1:59 Profit measures whether the period earned.
2:01 Cash decides whether the drawer can cover Friday, and only cash pays a bill.
2:08 Businesses monitor the cash balance closely because three kinds of demands
2:12 never stop arriving.
2:14 Recurring expenses come first: rent of twenty-five hundred dollars on the first
2:19 of every month, and payroll every Friday, whether the month poured forty-two hundred
2:24 cups or eighteen hundred.
2:26 Lenders come second: the equipment loan takes its three hundred dollars every
2:30 month until the balance is gone.
2:33 Unforeseen expenses come third: if the compressor in the commercial fridge dies
2:37 in August, the repair bill arrives that week, on no schedule at all.
2:42 The cash balance is the one resource that meets all three,
2:45 so the statement's job is to show Cami, month by month,
2:49 whether that balance is rising or falling, and why.
2:54 Cash inflows are the payments that raise the balance,
2:57 and they come in four families.
2:59 First, payments from customers, the shop's biggest by far:
3:04 about eighteen thousand dollars in a typical month, most of it tapped or handed
3:08 across the counter the same day the cup is poured.
3:12 Catering adds a wrinkle worth stating plainly: a catering deposit is cash today
3:17 for boba Cami has not poured yet.
3:19 When a school pays half up front for a spring boba bar,
3:22 the deposit lands as an inflow now, and the revenue belongs to the day of the
3:27 event, later. Inflow now, revenue later.
3:31 Keep that sentence, because the next topic turns on it.
3:35 Second, interest and dividends earned on assets the business holds:
3:39 if the shop's cash cushion sits in an account that pays interest,
3:43 each month's interest deposit is an inflow.
3:45 Third, proceeds from selling a business asset: if Cami replaces a blender and
3:51 sells the old one for forty dollars, that forty enters as cash from equipment,
3:55 a separate stream from selling drinks.
3:58 Fourth, infusions of financial capital: the largest single inflow in Steep Street
4:04 history was fifteen thousand dollars of loan money landing at once on founding
4:08 day, cash in the account before one cup had sold.
4:13 Cash outflows are the payments that lower the balance,
4:16 and at Steep Street every one has a name.
4:19 Suppliers: the tapioca and tea purchases scale with the season,
4:23 sixty-three hundred dollars in a July, twenty-seven hundred in a February.
4:28 Employees: staff wages sit inside the ninety-nine hundred dollars of operating
4:33 payments each month, and wages clear every Friday.
4:37 Lenders: the loan payment sends three hundred dollars out,
4:41 and here the cash flow statement shows something the income statement hides.
4:45 Only fifty of those dollars are interest expense, so fifty is all the income
4:50 statement reports.
4:52 The other two hundred fifty repay principal, debt repayment that appears on
4:56 no income statement and leaves the drawer anyway.
5:00 Taxes: estimated payments go to the government quarterly,
5:04 a lumpy outflow that lands in a single week four times a year.
5:08 Asset purchases: the four thousand dollars of small wares the shop has added over
5:13 three years left as cash the day each item was bought.
5:17 Owners come last: a corporation pays its shareholders dividends,
5:21 and Steep Street's version is Cami's owner draw, two thousand dollars a month,
5:26 which Topic 3.6 ruled is never an expense line and which the cash flow statement
5:31 counts anyway, because the cash is gone either way.
5:37 Now run the whole year.
5:39 The season curve plots twelve months of cups: a July peak of forty-two hundred,
5:44 a February trough of eighteen hundred, and costs drawn underneath in a nearly flat
5:49 line, because rent, insurance, the loan, and the draw ignore the season completely.
5:56 Wages are the one exception: the cost line stretches a notch in July when Cami
6:00 staffs extra shifts, and the card keeps the simple shape while the narration names
6:05 it.
6:06 Compute the two extremes.
6:08 July: forty-two hundred cups at six dollars brings in twenty-five thousand
6:13 two hundred.
6:14 Outflows: sixty-three hundred of supplier purchases,
6:18 ninety-nine hundred of operating payments, three hundred to the loan,
6:22 two thousand of owner draw, eighteen thousand five hundred in total.
6:27 Net cash flow: positive six thousand seven hundred.
6:31 February: eighteen hundred cups brings in ten thousand eight hundred.
6:35 Outflows: twenty-seven hundred of supplier purchases,
6:39 the same ninety-nine hundred of operating payments, the same three hundred loan,
6:43 the same two thousand draw, fourteen thousand nine hundred in total.
6:48 Net cash flow: negative four thousand one hundred.
6:52 A business's cash flow can end a period positive or negative,
6:55 and Steep Street's year contains both on schedule.
6:58 February also sits below the profit floor: covering ninety-nine hundred fifty
7:03 dollars of operating cost and interest at four dollars and fifty cents of
7:06 contribution per cup takes about twenty-two hundred cups a month,
7:10 roughly seventy-four a day, and February pours about sixty-four.
7:14 So February loses money and sheds cash, July earns the year,
7:18 and one sentence reconciles them: profit is annual, and payroll is Friday.
7:24 The statement's job is to make February's gap exact,
7:27 because an exact gap can be saved for in advance.
7:32 Here is the framework's own warning, and the reason this statement exists:
7:36 negative cash flow can end a business even when net income is positive.
7:41 A shop that earns thirty-four thousand dollars across a year still shuts down or
7:45 lands in bankruptcy if the drawer hits zero in February,
7:49 because Friday's wages cannot be paid out of July's future.
7:53 Steep Street's defense is already sitting on last topic's balance sheet:
7:57 nine thousand dollars of cash, the summer cushion, built on purpose.
8:02 The cushion's arithmetic: about thirty-four thousand of annual net profit,
8:07 minus about twenty-four thousand of annual draws, leaves roughly ten thousand
8:11 dollars of cash in the shop each year, and that retained cash is what carries a
8:15 negative February to a solvent March.
8:18 When cash runs tight anyway, the framework names three levers.
8:23 Collect accounts receivable faster: the March sheet carried fifteen hundred
8:27 dollars of winter catering invoices at net thirty, and a phone call,
8:31 or a small early-payment discount, turns that paper into cash sooner.
8:36 Obtain better terms from suppliers and lenders: if the tapioca supplier stretches
8:40 net thirty to net sixty for the trough months, February's outflows shrink while
8:45 February's sales stay untouched.
8:48 Raise more funds: borrow, or bring in new capital, an inflow purchased with future
8:53 outflows. This is also exactly how stakeholders read the statement.
8:57 A bank deciding whether to lend looks past the annual profit line and asks whether
9:02 the monthly cash covers employees, suppliers, creditors,
9:06 and, at a corporation, the shareholders expecting dividends,
9:10 on time, in every month, including the shallow ones.
9:14 The exam reads it the same way: a negative month inside a planned seasonal cycle,
9:19 covered by a cushion, is a healthy business on schedule,
9:22 and a negative month the business cannot cover is the warning the framework
9:26 describes.
9:30 The personal version of this statement fits on one card.
9:33 Sadie's forty dollar transfer, every Friday, timed to payday,
9:37 is a cash flow decision: an outflow to savings scheduled against a known inflow,
9:43 which is what Cami does with July at shop scale.
9:46 Households run on cash timing the same way shops do,
9:49 with rent due on the first and the paycheck landing Friday.
9:54 That's Topic 3.8.
9:56 The stack is complete: an income statement that measures the period,
10:01 a balance sheet that freezes the instant, and a cash flow statement that follows the
10:05 money, three tabs over the same shop, and together they are the packet the bank
10:10 reads when Cami files her refinancing application this spring.
10:14 One question stays open.
10:16 The person who assembles those pages has the most riding on how they read,
10:20 and this year the honest numbers carry one ugly quarter that the true story
10:24 explains.
10:26 What a financial statement owes the person who trusts it is Topic 3.9,
10:31 Ethics and Financial Reporting.
10:33 If this helped, a like tells YouTube to show it to more first-cohort students,
10:37 and subscribing gets you the whole course, in order,
10:40 as it's built.
10:42 And the free AP Business vocab pack, every key term from all five units,
10:46 is waiting at mamako.app, link below.
10:48 The 3.8 practice video is ready next.
10:51 See you next time.

The third statement, and what it adds

A cash flow statement tracks the money itself: what came in, what went out, and how the balance moved from the figure it opened on to the figure it closed on. Whatever span the business chooses to track becomes the period, monthly for a small operation, quarterly and annually for a public corporation.

The gap between this statement and the income statement is timing. Deliver a catered event and collect payment thirty days afterward, and the two statements disagree about when it happened. Revenue lands on the income statement the day the work was done. This statement stays silent until the payment actually clears. One of them tells you whether the period earned anything. The other tells you whether money is on hand this Friday, and money on hand is the only thing that settles a bill.

Why businesses watch the cash balance

Three kinds of demands never stop arriving, which is why the balance is monitored so closely. Recurring expenses come first, meaning rent on the first of the month and payroll every Friday, regardless of what the month sold. Lenders come second, because a loan payment leaves on schedule until the balance is gone. Unforeseen expenses come third, since a failed compressor produces a repair bill on no schedule at all. The cash balance is the single resource that meets all three.

Inflows: what fills the balance

Cash inflows are the payments that raise the balance, and the course groups them into four families. Payments from customers are the largest for most businesses and usually arrive the same day the sale happens. Interest and dividends earned on assets the business holds are the second family, so a cash cushion parked in an interest-bearing account produces a monthly inflow of its own.

Proceeds from selling a business asset are the third: replacing a blender and selling the old one for $40 brings in cash from equipment, a stream entirely separate from selling the product. Infusions of financial capital are the fourth, and they can dwarf everything else in a single moment, as when $15,000 of loan money lands in the account on founding day before one unit has sold.

Outflows: what drains it

Cash outflows lower the balance, and each one has a name. Suppliers are paid, and those purchases scale with the season, running $6,300 in a peak month against $2,700 in a trough. Employees are paid, with wages sitting inside the monthly operating payments and clearing every Friday. Taxes leave as quarterly estimated payments, which arrive in a lump four times a year rather than spreading themselves evenly. Assets are purchased, and each purchase leaves as cash on the day it is bought.

Lenders are paid too, and this is where the statement reveals what the income statement conceals. Take a $300 loan payment made of $250 of principal and $50 of interest. Fifty dollars is the only part treated as an expense above. The remaining $250 retires debt, shows up on no income statement anywhere, and empties the drawer just the same. Owners come last. A corporation sends its shareholders dividends; a small business sends its owner a draw. Neither is an expense line, and this statement records the draw regardless, because the money has left the building either way.

Seasonality, and reading the extremes

Running a whole year exposes the shape a single month hides. A peak month selling 4,200 units at $6.00 brings in $25,200, and against outflows of $6,300 to suppliers, $9,900 of operating payments, $300 to the lender, and a $2,000 owner draw, totalling $18,500, net cash flow is positive $6,700. A trough month selling 1,800 units brings in $10,800 against $2,700, $9,900, $300, and $2,000, totalling $14,900, so net cash flow is negative $4,100.

Cash flow can end a period positive or negative, and a seasonal business contains both on schedule. Costs stay nearly flat underneath the whole year because rent, insurance, the loan payment, and the owner draw ignore the season entirely, with wages the one line that stretches during the rush. One sentence reconciles the two columns: profit is annual, and payroll is Friday.

The cushion, and the levers when cash runs tight

Here is the warning the framework builds this statement around. A business can post positive net income and still be killed by cash running out. One earning $34,000 across a year shuts down or lands in bankruptcy all the same if the drawer empties during the trough, because this Friday's wages cannot be paid out of next July's sales. The defense is visible on the balance sheet as a deliberately large cash line, and its arithmetic is plain: about $34,000 of annual net profit less about $24,000 of annual owner draws leaves roughly $10,000 of cash inside the business each year.

When cash runs tight anyway, the course names three levers. Collect receivables faster, since a phone call or a small early-payment discount turns paper into cash sooner. Obtain better terms from suppliers and lenders, because stretching payment terms through the trough shrinks outflows while leaving sales untouched. Raise more funds, meaning borrow or bring in new capital, which is an inflow purchased with future outflows.

Stakeholders read the page the same way. A lender weighing an application looks straight past the annual profit figure and asks a narrower question: does the cash arriving each month cover the staff, the suppliers, the creditors, and at a corporation the shareholders waiting on dividends, punctually, in the thin months as well as the fat ones? A shortfall sitting inside a planned seasonal cycle and covered by a cushion describes a healthy business behaving exactly as expected. A shortfall the business has no way to cover is the danger signal being pointed at.

Essential knowledge covered on this page

Learning objective	Essential knowledge	Section
3.8.A Components of a business cash flow statement	3.8.A.1, 3.8.A.2, 3.8.A.3, 3.8.A.4, 3.8.A.5	The third statement, Why businesses watch the cash balance, Inflows, Outflows, Seasonality
3.8.B How stakeholders use cash flow information	3.8.B.1, 3.8.B.2	The cushion, and the levers when cash runs tight

CED essential knowledge for Topic 3.8

Worked Examples

Net cash flow in a peak month

Compute net cash flow for a month by listing every inflow and every outflow.

A peak month sells 4,200 units at $6.00. Supplier purchases run $6,300, operating payments $9,900, the loan payment $300, and the owner draw $2,000. Find net cash flow.

Units sold: 4,200
Price: $6.00
Supplier purchases: $6,300
Operating payments: $9,900
Loan payment: $300
Owner draw: $2,000

1. Total the inflows
Customer payments are the only inflow this month. 4,200 times $6.00 is $25,200.
2. Total the outflows
Add every payment that leaves. $6,300 plus $9,900 plus $300 plus $2,000 is $18,500.
3. Subtract outflows from inflows
$25,200 minus $18,500 is positive $6,700.
4. Note the full loan payment
All $300 of the loan payment is counted here, not just the $50 of interest, because the whole amount actually leaves the account.

Check answer

Answer
positive $6,700. The peak month adds $6,700 to the cash balance.

Why it matters
The owner draw is the line most often left out. It is not an expense on the income statement and it is unquestionably cash leaving the business, which is exactly the gap this statement exists to close.

Net cash flow in a trough month

Compute a negative net cash flow and explain why it does not by itself signal failure.

A trough month sells 1,800 units at $6.00. Supplier purchases fall to $2,700 with volume, while operating payments stay at $9,900, the loan payment stays at $300, and the owner draw stays at $2,000. Find net cash flow.

Units sold: 1,800
Price: $6.00
Supplier purchases: $2,700
Operating payments: $9,900
Loan payment: $300
Owner draw: $2,000

1. Total the inflows
1,800 times $6.00 is $10,800.
2. Total the outflows
$2,700 plus $9,900 plus $300 plus $2,000 is $14,900. Only the supplier line fell with volume.
3. Subtract to find the shortfall
$10,800 minus $14,900 is negative $4,100.
4. Check whether the shortfall is covered
A cash balance of $9,000 built during the peak months absorbs a $4,100 gap and still leaves $4,900.

Check answer

Answer
negative $4,100. The trough month drains $4,100, which the accumulated cash cushion covers with room to spare.

Why it matters
This is the distinction a lender is actually testing. A shortfall inside a planned seasonal cycle and covered by a cushion is a healthy business on schedule; the same shortfall with no cushion behind it is the warning.

The volume needed to cover this year's costs

Recompute break-even at current cost levels and compare it against actual pace.

Operating expenses now run $9,900 a month and interest is $50. Each unit still contributes $4.50. Find the current monthly break-even volume and the daily pace, then compare it against an average of about 100 units a day.

Monthly operating expenses: $9,900
Monthly interest: $50
Contribution per unit: $4.50
Days open per month: about 30

1. Total the costs to be covered
Add interest to the operating expenses. $9,900 plus $50 is $9,950.
2. Divide by contribution per unit
$9,950 over $4.50 is 2,211.1, so about 2,211 units are needed in the month.
$Q = \frac{9950}{4.50}$
3. Convert to a daily pace
2,211 over 30 days is about 74 units a day.
4. Compare against actual pace
An average of about 100 a day sits comfortably above 74. A trough month of 1,800 units is about 60 a day on the same 30-day count, which sits below the floor.

Check answer

Answer
about 2,211 units a month, roughly 74 a day. Covering current costs takes about 74 units a day, which the typical month clears and the trough month does not.

Why it matters
Break-even is not a one-time founding calculation. Costs grow as a business grows, so the floor moves, and a business that never recomputes it can drift below the line without noticing.

Key Terms

Practice Questions

6 questions. Nothing here is recorded or scored.

Question 13.8.A.1
Cold Snap Snow Cones
Greta Pollard owns Cold Snap Snow Cones, a trailer she parks beside the community ballfields from April through September. The stand sells shaved ice for cash, and nearly all of its yearly revenue arrives in June, July, and August, when tournament weekends run the line twenty deep. Greta bought the trailer two years ago with a bank loan she repays at 400 dollars a month, every month, including the winter months when the stand is closed and sells nothing; insurance and a storage-unit fee run through the winter too. This June she catered a summer camp's opening week and sent the camp an invoice due in thirty days, and she replaced her ice shaver, selling the old one for cash. The stand earns a profit every year, and every January Greta watches the business checking account fall week by week, so she prepares a monthly cash flow statement to know exactly how far it will fall.
Greta's monthly cash flow statement is best described as showing which of the following?
- A.The stand's profit for the month, after expenses are subtracted from revenue.
- B.The value of everything the stand owns and owes on the last day of the month.
- C.The amount Greta could sell the trailer and its equipment for.
- D.How the month's cash inflows and outflows changed the stand's cash balance.
Check answerHide answer
Answer: D
A.
The sibling-statement swap. This describes the income statement, which measures profit over a period, and profit includes revenue the business has earned even when the cash has not arrived.
B.
This describes the balance sheet, a snapshot of what the business owns and owes on one day.
C.
Resale value is an appraisal question, and no financial statement answers it. The cash flow statement tracks money moving through the account, not what the trailer would fetch.
D.
Correct. A cash flow statement shows how cash inflows and cash outflows moved a business's cash balance across a reporting period, opening balance to closing balance. Businesses build one because payroll, rent, loan payments, and surprise repairs are all paid from the cash balance, and no other statement tracks it.
Question 23.8.A.3
Which of the following items from Greta's June records appears as a cash inflow on the June cash flow statement?
- A.The 400-dollar monthly payment on the trailer loan.
- B.The invoice sent to the summer camp, due in thirty days.
- C.The cash received from the sale of the old ice shaver.
- D.The payment sent to the stand's syrup supplier this month.
Check answerHide answer
Answer: C
A.
This fails the direction test: the loan payment is cash leaving the stand, an outflow, and the statement's first job is sorting every movement by direction.
B.
The timing gap. The camp invoice is revenue the stand has already earned, and it becomes a cash inflow only on the day the camp actually pays; until then, no cash has moved.
C.
Correct. Cash inflows come in four families: payments from customers, interest or dividends earned on assets the business holds, proceeds from selling a business asset, and infusions of financial capital, such as money arriving from a new loan. Selling the old ice shaver is asset-sale proceeds: cash in, from equipment rather than from customers.
D.
This fails the direction test too: the syrup payment is cash leaving the stand, an outflow.
Question 33.8.A.2, 3.8.B.2
Cold Snap earns a profit every year. Which of the following best explains why Greta still watches the cash balance closely each winter?
- A.Outflows continue after inflows stop, so the cash balance falls in a profitable year.
- B.The winter months turn the stand's net income negative for the whole year.
- C.Seasonal businesses are legally required to hold their summer profit as cash.
- D.Negative winter cash flow shows that summer prices sit below per-unit cost.
Check answerHide answer
Answer: A
A.
Correct. Businesses monitor cash balances to be sure they can cover recurring expenses, repay lenders, and absorb surprises, and Cold Snap's winter runs those obligations against zero inflows. Negative cash flow can push a business toward shutdown or bankruptcy even when net income is positive, because bills are paid from the drawer rather than from the year's profit figure.
B.
This confuses one month's cash movement with the year's profitability. The stimulus says the year nets a profit, and that annual figure already includes the closed months.
C.
No law tells a seasonal business how to hold its summer profit. Greta keeps cash ready because the winter bills demand it, not because a statute does.
D.
This borrows pricing logic from another topic. A cash-negative month in a closed season says nothing about per-unit cost, because no units were even sold.
Question 43.8.B.2
A commercial cleaning company earns a profit on every job it completes, yet it struggles to make payroll because clients pay their invoices sixty days after each job ends. Which of the following actions would most directly improve the company's cash position?
- A.Raise the prices quoted on next year's cleaning contracts.
- B.Offer customers a discount for paying invoices within one week.
- C.Extend the payment window to ninety days to attract customers.
- D.Record unpaid invoices as cash on the monthly cash flow statement.
Check answerHide answer
Answer: B
A.
This pulls the profit lever on a timing problem. Higher prices raise next year's earnings and leave this month's sixty-day gap exactly where it was.
B.
Correct. When negative cash flow threatens, the framework names three repairs: raise more funds, collect accounts receivable faster, and obtain better terms from suppliers and lenders. The one-week discount is the second repair: it trades a slice of profit for cash that arrives roughly fifty days sooner, and payroll runs on cash.
C.
A ninety-day window runs the repair in reverse: it widens the gap between finishing a job and being paid for it. More customers on slower terms means more payrolls funded before the cash arrives.
D.
This changes the paper instead of the drawer. An unpaid invoice recorded as cash makes the statement false and makes payroll no easier.
Question 53.8.A.4, 3.8.A.5
Cold Snap Two-Month Cash Flow
Greta compares one peak month and one closed month, and the table shows the cash movements.
Line | July | January Cash collected from customers | $11,000 | $0 Supplies paid | $2,600 | $0 Helper wages paid | $1,800 | $0 Trailer loan payment | $400 | $400 Insurance | $200 | $200 Storage unit | $0 | $150 Which conclusion is supported by the table?
- A.The stand's net cash flow for the month of July came to 11,000 dollars.
- B.The stand operated at a loss across the full twelve months of operation.
- C.January lowered the cash balance by 750 dollars with the stand shut.
- D.The stand's outflows stop once the summer selling season ends.
Check answerHide answer
Answer: C
A.
The plausible wrong read of the same table: 11,000 is July's inflow line, and net cash flow is what remains after the 5,000 of outflows, a net of positive 6,000.
B.
This breaks the stimulus-support rule. Two months cannot testify about a whole year, and the stimulus already said the stand is profitable annually.
C.
Correct. Net cash flow is inflows minus outflows, computed one period at a time. January: nothing in, against 400 plus 200 plus 150, 750 dollars out, so the cash balance falls by exactly 750 in a month with the shutters closed. July runs the same arithmetic the other way: 11,000 in against 5,000 out, a net of positive 6,000.
D.
The January column itself contradicts this: the loan, insurance, and storage lines keep billing straight through the closed season.
Question 63.8.A.3, 3.8.A.4
A corporation prepares its annual cash flow statement. Which of the following appears as a cash outflow?
- A.Dividends paid to the corporation's shareholders.
- B.Dividends earned on the stock the corporation owns.
- C.Money received from a newly approved bank loan.
- D.Cash collected from customers during the year.
Check answerHide answer
Answer: A
A.
Correct. The outflow list runs: payments to employees and suppliers, interest paid on existing loans, taxes paid to the government, money spent purchasing assets, debt repayment, and dividends, which are cash a corporation sends out to its shareholders.
B.
The direction swap on the same word. Dividends earned on stock the business owns arrive as inflows, exactly like interest earned on its accounts.
C.
The adjacent-transaction confusion. New loan money is an inflow on the day it lands, even though it creates a liability; the outflows come later, payment by payment, as the loan is repaid.
D.
Cash collected from customers is the first family of inflows. Sort every line by the direction the cash moves, and money arriving from sales is the clearest inflow on the statement.

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Essential knowledge covered

3.8.A.1 · 3.8.A.2 · 3.8.A.3 · 3.8.A.4 · 3.8.A.5 · 3.8.B.1 · 3.8.B.2