Sean
Nice job putting note payable and common stock below financing activities, easy to mistake them for investing activities. I also enjoyed reading your perspective on the loan application itself. Like you, I think a lot of start-up businesses struggle early in their life, especially with cash flow.
I see 2 key areas of opportunity from a lending standpoint - when can we expect to see the A/R recovered, and what is the additional loan needed for. this may be a case where the A/R is a single vendor who will pay promptly, or the additional loan is needed to purchase/create inventory to satisfy an order. I think if we had a good understanding of both those questions we would feel more confident about lending additional money.
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Comment No. 2
Sherri
RE: Income and cash flows ![Attachment]()
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Great post! I considered using this method as well, but went with the more commonly used indirect method. I see you put cash inflow as $100,000 and then listed accounts receivable as $25,000 and subtracted. I believe for the sake of the cash flow statement you really only need to report the cash effects. As Spiceland points out, “Accounts receivable is the balance sheet account that is affected by sales revenue. Specifically, accounts receivable is increased by credit sales and is decreased as cash is received from customers” (1273). You basically ended up with the answer but it doesn’t look like in the book they list total sales less accounts receivable separately but instead do the calculation before the entry on the statement of the cash flow.
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