University of Maryland Extension

Cash flow periods

Dale M. Johnson, Extension Specialist, Farm Management

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Cash flow usually covers the same production period as the income statement but cash flow is almost always broken down into smaller time periods such as a quarter or a month. For each period, the cash flowing out of the business is subtracted from the cash flowing into the business to calculate the ending cash balance – the amount of money on hand at the end of each period. If the owner/operator is doing a business plan for the new enterprise, then the cash flow budget is part of the business plan. Many new farms fail, not because the new idea is bad or because profit is insufficient in the long term, but because there is not sufficient cash in the early stages of the project.

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