What Is a Cash Flow Diagram?

The cash flow diagram is a graph on the time axis that uses a short line with an arrow to indicate the law of the capital activities of a construction project or an enterprise. It is called a cash flow diagram. The inflow is positive (that is, income), and an upward arrow is drawn on the cash flow time scale; the outflow is negative (that is, expenditure), and a downward arrow is drawn below the scale. Each arrow should be drawn at the beginning of each interest-bearing cycle, which is the end of the last interest-bearing cycle. ^[1]

Cash flow chart

Past business operations have emphasized

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For a construction project, in terms of construction and operation, it must go through a certain project cycle. In this project cycle, because the cash inflow and outflow are different in terms of amount and time, In order to facilitate the systematic analysis, it is usually determined in the form of a table, so as to indicate the cash flow that occurred in a specific time. What are the rules for drawing a cash flow chart?

Let's take a look at what is a cash flow chart. This is a chart that reflects the movement status of funds in a specific system. It is to draw the cash flow into a chart with time coordinates as the main chart to show the corresponding relationship between each cash inflow or outflow Therefore, it can accurately reflect the occurrence of gold flow, and it can show the movement status of funds under the premise of a specific system from a comprehensive, image, and direct.

When drawing, you must use the horizontal axis as the time axis and extend to the right. This extension is expressed in time. The axis can be divided into several intervals to react. One interval represents one time. Generally speaking, It can be expressed in years. If it is a more special period, it can be expressed in quarters or half a year. From the point of time on the time axis, this is mainly used to indicate the time at the end of the year, or at the beginning of the next year. Zero is the first At the beginning of the year, this is the time point of the present value. The vertical arrows connected by the horizontal axis represent the cash flow at different points in time. The length of the vertical arrow reflects the proportion of the cash flow. If the arrow extends downward, it indicates the outflow of cash. If the arrow flows upward, Then it means there is an inflow of cash, and the up and down arrows indicate the value of cash flow.

The cash flow of an enterprise is the cash flow generated by operating activities,

Operating Net Cash Flow and

1. Reflect the cash flow of the company and evaluate the future generation of the company

The purpose of compiling the cash flow statement is to provide information on cash earning and expenditure in an accounting period to reflect the time, amount and reason of the company's cash flow. The formula can be expressed as:

Current net cash increase = Net operating cash flow + Net investment cash flow + Net funding cash flow

Intuitively, the cash flow statement is a detailed explanation of the causes of changes in the beginning and ending balances of "monetary funds" in the comparative balance sheet. The method of preparing the cash flow statement is more complicated, which makes it difficult for most investors to fully understand and use its information, and it lacks a comprehensive understanding of its role and deficiencies. Many investors have high expectations for the cash flow statement, believing that "net operating cash flow" can provide more real operating results information than "net profit", or that it is not easily manipulated by listed companies, and so on. In fact, these views are more one-sided, mainly because:

1. The cash flow statement is prepared on the basis of a cash system, that is, only the cash receipts and expenditures of the current period are recorded, regardless of whether these cash flows are attributed to the current profit or loss. Therefore, the company's current performance is not necessarily related to "net operating cash flow", not to mention the sudden cash changes caused by investment and financing activities. In addition, under the accrual basis, the company's profit statement can normally reflect the impact of current credit sales and credit purchases, while the cash flow statement excludes commercial credit transactions. Unstable commercial repayments and debt repayments make the "net operating cash flow" more volatile than the "net profit" data.

2. The cash flow statement is just a kind of time point report, an analytical report of monetary funds item. Therefore, its shortcomings are very similar to the balance sheet. Obviously, the "monetary funds" balance at a particular point in time can be manipulated. For example, many listed companies have adopted temporary agreement repayment methods, receiving cash at the end of the year, and repaying the debt to the debtor at the beginning of the year. In this way, the year-end cash balance of the company increased sharply, and the receivables were drastically reduced. As a result, both the balance sheet and the cash flow statement were very good-looking, but the true level of cash holdings remained unchanged. On the contrary, in this case, the income statement is not affected significantly (except for the reduction of the current bad debt expenses), which can still accurately reflect the current operating results.

3. There are problems with the compilation method. Although China requires listed companies to prepare a cash flow statement using the direct method, this goal is difficult to achieve without the practical conditions of large-scale accounting computerization and account reorganization. At present, most companies still use the indirect method to calculate the net operating cash flow by adjusting the net profit data, but the shortcomings of this method are very obvious. In current accounting practice, the calculation of "net operating cash flow" ultimately depends on the current changes in "monetary funds", not the actual cash impact of each business. For example, in its calculation process, the effect of recovering or writing off previous receivables is the same, and it will increase the "cash received from sales of goods and services", which is likely to be misleading to investors.