Worksheet: Cash Flow Projection for Operating Loan Determination

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A cash flow statement can be described simply as a recording of the dollars coming in and the dollars going out of a business. It shows where the money comes from (the inflow of cash) and where the money goes (the outflow of cash).

A record of cash inflow and outflow that has already occurred in a business is an actual or historical cash fl ow. An estimate or forecast of cash inflow and outflow into some future period is a cash fl ow projection. The actual cash fl ow of a business provides important information for making a cash fl ow projection into the future. The cash fl ow projection provides information on the cash -generating ability and the cash requirements of a business, and it indicates the timing of both.

A cash fl ow can be set up for either the entire farm business (including family living expenses and nonfarm income) or it can be set up to study only a segment of the business. A cash fl ow projection often includes only the cash inflow and outflow effect of a proposed business expansion.

Michael R. Langemeier
Kansas State University Agricultural Experiment Station and Cooperative Extension Service