How to analyze a company’s cash flow?

A company may be profitable and its sales may be growing, yet the amount of cash in its bank account may still be decreasing. This happens because profit and cash flow reflect different aspects of a company’s financial performance – some of the cash may be tied up in accounts receivable or inventory, used for investments, or allocated to other business needs.

A new PLY Business article explains how cash flow analysis helps companies understand where their money is moving, how much cash is generated by core operations, and what causes the difference between reported profit and actual cash flow.

One of the key factors behind this difference is working capital. As a business grows, accounts receivable and inventory requirements may also increase, meaning that part of the cash generated by operations is used to finance them. The article explores how to assess changes in accounts receivable, inventory, and accounts payable, as well as their impact on the company’s cash flow.

It also shows how Power BI analytics makes it possible to move from an overall cash flow result to the specific factors behind it – by analyzing cash flows from operating, investing, and financing activities, differences between EBITDA and operating cash flow, working capital indicators, and individual customer or supplier accounts.

This type of analytics not only helps explain changes in cash that have already occurred, but also enables companies to better plan future cash requirements, payments, investments, and financing needs.

We invite you to read the full PLY Business article: “Cash flow analysis with Power BI: why is the company profitable but short on cash?”