Financial Intelligence for HR Professionals: What You Really Need to Know About the Numbers

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The Language of Cash Flow

You’d think a cash flow statement would be easy to read. Since cash is real money, there are no assumptions and estimates incorporated in the numbers. Cash coming in is a positive number, cash going out is a negative one, and net cash is simply the sum of the two. In fact, though, we find that nearly every nonfinancial manager takes a while to understand a cash flow statement. One reason is that it is always divided into categories, and the labels on the categories can be confusing. A second reason is that the positives and the negatives aren’t always clear. For example, a typical line item might say, “(increase)/decrease in accounts receivable,” followed by a positive or a negative number. Well, is it an increase ...