Cash Flow Projection for Operating
A cash flow statement can be simply de-
scribed as a record of the dollars coming in and
the dollars going out of a business. It shows
where the money comes from (the inflow of
cash) and where the money goes (the outflow of
Actual and Projected Cash Flow
A record of cash inflow and outflow that has
already occurred in a business is an actual or
historical cash flow. An estimate or forecast of
cash inflow and outflow into some future pe-
riod is a cash flow projection. The actual cash
flow of a business provides important informa-
tion for making a cash flow projection into the
future. The cash flow projection reveals the
cash generating ability and the cash require-
ments of a business and it indicates the timing
Total Business and Partial
Business Cash Flow
A cash flow can be set up for the entire farm
business (including family living expenses and
nonfarm income) or it can be set up to study
only the business or a segment of the business.
For example, it may summarize all the cash ex-
penses and income from a specific enterprise.
A cash flow projection will be used to consider
the cash inflow and outflow effect of a pro-
posed investment or change in the business.
Long-Run Profitability vs.
Two management questions that need to be
studied in regard to proposed business changes
are long-run profitability and short-run feasibility.
Long-run profitability refers to a period of 5 years
or more and is usually studied through the use of
projected income statements.
Short-run feasibility refers to the income-gener-
ating ability of a business in a short period of time,
usually 1 year to 3 or 5 years. It is usually studied
through the use of a projected cash flow. The Cash
Flow Projection form in this leaflet can be used to
study the short-run feasibility of a business change.
It has been designed specifically to project the
operating loan balance of a fa