To build our forecast cash flow statement, the first question is in which period are we doing this? Well I know my balance sheet is unbalanced in period 1, 2 and 3 I therefore only need my cashflow statements in period 1, 2 and 3. I don't need to do historical cash flow statements I start with net income, I go up to my income statement 44.1 Next up, I need to workout the increase or decrease in accounts payable So if we go to our accounts payable, it's gone from 12 to 12.6 Now if that's gone up, that means I owe my suppliers more cash, it means I've got their cash! That means my cash has gone up 0.6 Good for me, I need a positive 0.6 In order to get that, I will take this year's accounts payable minus last year's Liabilities and equity, you take this year minus last year That gives me my cashflow from operations of 44.7. Next up we look at investments. Increase or decrease in investments? Now investments have gone up from 60 to 65 Now this means that I have purchased investments, I've spent money, I've spent 5 So I want a negative 5 in the cashflow statement; so I will take last year minus this year When it's an asset you take last year minus this year. When it's a liability and equity, the opposite. That's my cashflow from investing activities done Next up, increase or decrease in long-term debt Long-term debt has gone from 20,still to 20 So I need to imagine what would have happened if it had gone up So imagine it had gone up from 20 to 22 (that's more cash to me) I'd want positive 2, so I take this year minus last year, great! That's my cash flow from financing activities I now sum those three items above up: cash flow from financing, cash flow from investing, cash flow from operations It gets my net cashflow of 39.7 Now onto that I need to add beginning cash. I'm actually going to take last year's ending cash first of all I go to my balance sheet and that 12, last year's ending cash was 12 I can now link this year's beginning cash to that same 12 So my beginning cash was 12, I add on 39.7 to give me ending cash in period 1 of 51.7 Great! Let's copy the cash flow statement to the right And I've got ending cash of 51.7, 88.6 and 147.9 Let's take those figures, let's put them up into the balance sheet and hopefully our balance sheet will balance So right up to the top, cash in my balance sheet in E19 equals 51.7 Does my balance sheet balance? Yes it does, fantastic! I'm getting excited now. Guys let's copy that into period 2 and period 3 Does the balance check go to zero? Yes it does, fantastic! So the cashflow statement was all finished, we then plugged cash into the balance sheet and the balance sheet was all finished