What Makes a Credit Score Rise or Fall?
OUR financial decisions can affect your credit score in surprising ways. Two credit-scoring simulators can help consumers understand the potential impact.The Fair Isaac Corporation, which puts out the industry-standard FICO scores, offers the myFICO simulator. A consumer with a score of 707 (considered good) and three credit cards would be likely to add or lose points from his score by making various financial moves. Following are some examples:it is only significant when used to compare similar entities because different industries have different structures. Too, if the entity has large, long-term debt structures, the usefulness of the statement has limited applicability. It could, however, be used to judge whether debt commitments can be met without debt restructuring. Because this statement is historical, great care should be taken when projecting future results based on it. There is no guarantee that the results will continue in the future.

Ultimately, the cash flow statement gives us great insight into how cash is obtained and used during the statement period. Interestingly, the s

Many people are familiar with two important financial statements, the Profit and Loss and the Balance Sheet. Fewer of them recognize the Statement of Cash Flows (also referred to as the Sources and Uses Statement). Additionally, while the physical layout of the statement has many variations, the general content is constant. It will be reviewed here. We will also discuss what makes up the statement, what it is used for and some limits.

The Statement of Cash Flows looks at three different cash activities: the operating, investing and financing activities. From the activities, cash is either received (called inflows) or spent (called outflows).

Cash flows from the operating activities are those generated or spent on the main business of the entity. These might be from the sale of products or services. If products are sold or services are rendered, cash will be received for the activity. If goods are purchased for sale, or to add new inventory, then cash is spent. Additional inflows of cash are received from interest or dividend payments and collections on accounts too. Outflows of cash, besides payments to suppliers, could be payments on accounts payable, interest payments, employee salaries and taxes. A positive result from operating activities would result in a profit (net income). Conversely, a negative result would be a loss (net loss).

The second cash flow producing activity is from investing activities. These activities have both positive and negative cash flows. Investing, as used on this statement, represents those activities undertaken to make additional cash for the entity. Typical of these are making loans, receiving payments on previous loans and purchasing or selling of assets (e.g., buildings, equipment, land, patents, or copyrights). Again the net value of inflows and outflows are contributed directly from entity activities.

The final activity is the result of generating more usable cash to be used in the business. Financing activities relate to borrowing of money and in general are related to acquiring or returning capital. Common inflow activities are issuing new securities, bonds, mortgages, or notes. Outflows result from repurchasing securities or retiring debts. Also, this category includes dividends paid to stockholders.

What does this statement tell us? It is used for many types of analysis. It is a useful metric on the entity's ability to take advantage of new potential investments, maintain or increase the current level of operations and to replace or modernize assets.

The statement does have some limitations. As a comparison tool, it is only significant when used to compare similar entities because different industries have different structures. Too, if the entity has large, long-term debt structures, the usefulness of the statement has limited applicability. It could, however, be used to judge whether debt commitments can be met without debt restructuring. Because this statement is historical, great care should be taken when projecting future results based on it. There is no guarantee that the results will continue in the future.

Ultimately, the cash flow statement gives us great insight into how cash is obtained and used during the statement period. Interestingly, the st

Cash flows from the operating activities are those generated or spent on the main business of the entity. These might be from the sale of products or services. If products are sold or services are rendered, cash will be received for the activity. If goods are purchased for sale, or to add new inventory, then cash is spent. Additional inflows of cash are received from interest or dividend payments and collections on accounts too. Outflows of cash, besides payments to suppliers, could be payments on accounts payable, interest payments, employee salaries and taxes. A positive result from operating activities would result in a profit (net income). Conversely, a negative result would be a loss (net loss).

The second cash flow producing activity is from investing activities. These activities have both positive and negative cash flows. Investing, as used on this statement, represents those activities undertaken to make additional cash for the entity. Typical of these are making loans, receiving payments on previous loans and purchasing or selling of assets (e.g., buildings, equipment, land, patents, or copyrights). Again the net value of inflows and outflows are contributed directly from entity activities.

The final activity is the result of generating more usable cash to be used in the business. Financing activities relate to borrowing of money and in general are related to acquiring or returning capital. Common inflow activities are issuing new securities, bonds, mortgages, or notes. Outflows result from repurchasing securities or retiring debts. Also, this category includes dividends paid to stockholders.

What does this statement tell us? It is used for many types of analysis. It is a useful metric on the entity's ability to take advantage of new potential investments, maintain or increase the current level of operations and to replace or modernize assets.

The statement does have some limitations. As a comparison tool, it is only significant when used to compare similar entities because different industries have different structures. Too, if the entity has large, long-term debt structures, the usefulness of the statement has limited applicability. It could, however, be used to judge whether debt commitments can be met without debt restructuring. Because this statement is historical, great care should be taken when projecting future results based on it. There is no guarantee that the results will continue in the future.

Ultimately, the cash flow statement gives us great insight into how cash is obtained and used during the statement period. Interestingly, the s

versely, a negative result would be a loss (net loss).

The second cash flow producing activity is from investing activities. These activities have both positive and negative cash flows. Investing, as used on this statement, represents those activities undertaken to make additional cash for the entity. Typical of these are making loans, receiving payments on previous loans and purchasing or selling of assets (e.g., buildings, equipment, land, patents, or copyrights). Again the net value of inflows and outflows are contributed directly from entity activities.

The final activity is the result of generating more usable cash to be used in the business. Financing activities relate to borrowing of money and in general are related to acquiring or returning capital. Common inflow activities are issuing new securities, bonds, mortgages, or notes. Outflows result from repurchasing securities or retiring debts. Also, this category includes dividends paid to stockholders.

What does this statement tell us? It is used for many types of analysis. It is a useful metric on the entity's ability to take advantage of new potential investments, maintain or increase the current level of operations and to replace or modernize assets.

The statement does have some limitations. As a comparison tool, it is only significant when used to compare similar entities because different industries have different structures. Too, if the entity has large, long-term debt structures, the usefulness of the statement has limited applicability. It could, however, be used to judge whether debt commitments can be met without debt restructuring. Because this statement is historical, great care should be taken when projecting future results based on it. There is no guarantee that the results will continue in the future.

Ultimately, the cash flow statement gives us great insight into how cash is obtained and used during the statement period. Interestingly, the s

siness. Financing activities relate to borrowing of money and in general are related to acquiring or returning capital. Common inflow activities are issuing new securities, bonds, mortgages, or notes. Outflows result from repurchasing securities or retiring debts. Also, this category includes dividends paid to stockholders.

What does this statement tell us? It is used for many types of analysis. It is a useful metric on the entity's ability to take advantage of new potential investments, maintain or increase the current level of operations and to replace or modernize assets.

The statement does have some limitations. As a comparison tool, it is only significant when used to compare similar entities because different industries have different structures. Too, if the entity has large, long-term debt structures, the usefulness of the statement has limited applicability. It could, however, be used to judge whether debt commitments can be met without debt restructuring. Because this statement is historical, great care should be taken when projecting future results based on it. There is no guarantee that the results will continue in the future.

Ultimately, the cash flow statement gives us great insight into how cash is obtained and used during the statement period. Interestingly, the s

it is only significant when used to compare similar entities because different industries have different structures. Too, if the entity has large, long-term debt structures, the usefulness of the statement has limited applicability. It could, however, be used to judge whether debt commitments can be met without debt restructuring. Because this statement is historical, great care should be taken when projecting future results based on it. There is no guarantee that the results will continue in the future.

Ultimately, the cash flow statement gives us great insight into how cash is obtained and used during the statement period. Interestingly, the statement will be found, in some form, in a stock prospectus. So, it stands along side the other two critical statements of entity position, the Profit and Loss and the Balance Sheet. It is important when reviewing entity operations that we carefully consider this statement along with the others to get a clear picture of the cash flow position.