Ending Cash

What’s Included in Ending Cash? 💼

Cash Components:

• Physical cash
• Bank account balances
• Money market accounts
• Short-term investments (under 3 months)
• Petty cash

How to Calculate Ending Cash

The formula for Ending Cash:

Ending Cash = Beginning Cash + (Operating Inflows – Operating Outflows) + (Investing Inflows – Investing Outflows) + (Financing Inflows – Financing Outflows) 

Real-World Example for Ending Cash:

• • Starting Cash: $100,000

Operating Activities:

• • • Inflows: +$50,000 (customer payments)
    • Outflows: -$30,000 (expenses paid)

Investing Activities:

• • • Inflows: +$20,000 (asset sale)
    • Outflows: -$25,000 (new equipment)

Financing Activities:

• • Inflows: +$40,000 (new loan)
  • Outflows: -$15,000 (loan payment)

Ending Cash = $140,000

Why It Matters

Understanding ending cash is crucial for:

• • Planning future spending
  • Managing working capital
  • Meeting payment obligations
  • Making investment decisions

• Evaluating liquidity
• Measuring actual business performance

Understanding Cash Flow Categories 📊

To calculate and manage ending cash effectively, you need to track three key types of cash movements:

Operating Activities:

• Core business transactions like customer payments
• Regular expenses such as vendor and employee payments
• Tax obligations and operational costs
• Usually your main source of sustainable cash flow

Investing Activities:

• Purchase or sale of long-term assets
• Investment in securities or other businesses
• Capital expenditures for growth
• Reflects your long-term business strategy

Financing Activities:

• Borrowing and loan repayments
• Stock issuances or buybacks
• Dividend distributions
• Shows how you’re funding your business

Managing Ending Cash

To maintain healthy ending cash:

• Monitor all three cash flow categories
• Time payments strategically
• Speed up collections
• Maintain cash buffers
• Plan for seasonal variations
• Set minimum thresholds

Remember: Ending Cash is a key indicator of your business’s financial health and ability to handle short-term obligations and seize opportunities.