Page 52 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
analysing the past Cash Flow statements and taking
actions for improvement in the policies.

In any business, Cash may be generated through three
type of activities
1.Operating Activities – Activities related to day-to-day
business, like payment to suppliers, payment of
expenses, receipt from customers, cash sales and
purchases.

2.Investing Activities – These are the activities related
to long term investments. Examples are purchase or sale
of capital assets
3.Financing Activities – These activities relate to
sourcing and repayment of long-term investments.
Examples are Issue/Redemption of share capital,
Receipt/ payment of bank loans etc.
It is the responsibility of a business owner to ensure that
the total result of the above three kinds of activities
generates a positive result. In this case only, the Cash
balance would be higher than the previous year. A
negative result will lead to reduction in the Cash balance.
Abridged version of Cash ow statement looks like below