What is the Difference Between Cash Flow Statement and Cash Flow Projection?
🆚 Go to Comparative Table 🆚The main difference between a cash flow statement and a cash flow projection lies in their purpose and the time frame they cover. Here are the key differences:
- Purpose:
- Cash flow statement: It provides a record of actual cash flows for a past period, showing the inflow and outflow of cash for a specific time frame.
- Cash flow projection: It estimates the expected cash inflows and outflows for a future period, helping in planning and decision-making.
- Time frame:
- Cash flow statement: It covers a past period and is a historical representation of cash movements.
- Cash flow projection: It covers a future period and is a forward-looking estimation of cash movements.
- Level of detail:
- Cash flow statement: It provides a detailed account of actual cash flows during a given period, making it less detailed than a cash flow projection.
- Cash flow projection: It includes more details and variables, such as seasonality, growth, and external factors, which affect future cash flow.
In summary, a cash flow statement is a historical record of cash movements, while a cash flow projection is a forward-looking estimation of future cash flows. Both tools are essential for managing a business's finances and making informed decisions about expenses and financing.
Comparative Table: Cash Flow Statement vs Cash Flow Projection
The main difference between a cash flow statement and a cash flow projection lies in their purpose and the time period they cover. Here is a comparison between the two:
| Cash Flow Statement | Cash Flow Projection |
|---|---|
| Reports actual cash inflows and outflows for a past period | Estimates expected cash inflows and outflows for a future period |
| Provides a historical view of cash movements | Provides a forward-looking view of cash movements based on expected activities |
| Helps identify areas where a business may need to adjust marketing strategies or make other changes to improve financial performance | Helps predict cash shortages and surpluses, and estimate the effects of business changes, such as hiring an employee |
| Includes categories for cash inflows, cash outflows, and net cash flow | Includes categories for operating, investing, and financing activities |
| Can aid in determining a company's free cash flow | Can improve its accuracy over time by comparing projections to actual results |
In summary, a cash flow statement is a financial tool that reports the actual cash transactions that have occurred in the past, while a cash flow projection is a forward-looking statement that estimates the expected cash flows for a future period based on anticipated activities. Both are important for a company's financial management and planning.
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