Sources and Uses of Cash Schedule

Both are essential to understand to make sound decisions.

Andy Yan

Reviewed by

Andy Yan

Expertise: Investment Banking | Corporate Development


August 15, 2023

The sources and uses of cash for finance are essential to understand to make sound decisions. The origins of cash are the different ways a company can obtain money, and the uses of cash are how the company uses that money.

There are many different sources and uses of cash for finance. For example, a company may have an account with a bank or other financial institution or access to a line of credit.

It could also obtain financing through debt or equity markets. For example, a company might generate income from its assets or sell them to get cash.

The world of finance is very complicated. There are a lot of rules, regulations, and restrictions that make it difficult for people to invest their money. But there are also ways for people to access cash that they can use in other ways.


The most common sources of cash are loans and credit cards from banks. These are the two most popular methods because they have minor restrictions and requirements. However, there are various other options one can consider.

We can get money from net profit, boost liability, decrease any asset, and grow share capital annually.

Net profit is the primary source of cash gaining and the most beneficial way to improve wealth. Therefore, the cash flow statement is based on net profit at the beginning.

Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital.

Improving liability and assets can let the company grow and gain more net profit. In addition, as the share capital grows, putting more money in it can result in increased cash flow.

Sources and Uses of Cash: Cash Flow

The sources and uses of cash are one of the most important topics in finance. The cash flow statement is a financial statement that reports the cash flows. The statement shows all transactions over time, classified as operating or investing activities. 

Operating activities include all transactions related to day-to-day operations, such as selling products or services.

Cash flow from operating activities is generated when a company receives cash from its normal business operations. It may include revenue from product sales, interest income, or other sources such as tax refunds.

On the other hand, investing activities include any transaction that doesn't directly relate to day-to-day operations, such as purchasing new equipment or property.

To sum up, the net cash flow is the difference between the total cash inflows and outflows.

Net Cash Flow = Total Cash Inflows - Total Cash Outflows

Thus, it is a measure of liquidity as it estimates the amount of money coming in and out of a company.

Overall, it is the movement of cash from one account to another. It is a measure of how well a company manages its money.

Type of cash flow statement:

  1. Operating cash flow
  2. Investing cash flow
  3. Financing cash flow

The operating cash flow statement shows an overall image of company activities inflow, including the day-to-day operational activity. The influx like Salary, vendor, lease, tax, and interest payments are examples of sales and outflows of cash.


Cash flow measures the amount of money that flows in and out of business through sales and purchases. It is often called the "lifeblood" of a company because it can be used to evaluate the financial health of a firm.

Here, financial health implies the ability to fund long-term growth, retain appropriate working capital, and meet short-term demands. It can be positive or negative, depending on whether the company brought in more Money than it spent during that time or vice versa.

The Importance of Cash

Cash is a liquid asset and is the most commonly used form of payment in the world. It is a medium of exchange because it can be used to purchase goods and services.

The primary sources of cash are:

The main uses of cash are:

  • To pay for goods or services that have been received
  • To pay taxes owed to the government

Cash is essential in finance because it can be used as an investment, savings, or emergency fund.

It plays a vital role in the day-to-day life of people and the financial world. 

Money is the lifeblood of any business. It is an essential asset a company should have to stay afloat and provide for its employees.

The importance of Money in finance is often overlooked by many entrepreneurs who are more focused on developing new projects, products, and technologies.

Entrepreneurs believe that improving their products is an essential part that will help grow the business and take over the market. More selling can also mean more net profit coming to the company.

It can be found in different forms, but it can be challenging to identify which format is the most important for your business. 

Money can be classified into five different types of cash: commodity, fiat, fiduciary, representative, and commercial bank money.

1. Commodity Money

A currency with inherent value that resembles a commodity is known as commodity money. This element of intrinsic value is the primary characteristic of the commodity money. 

In general, exchange, trade, and economic activity were more complex when it was first introduced than they are now. But using the commodity money can qualify the process of comparing services and goods.


Understanding how cash flows through your company and what you need to do with it will help you decide where to invest your money first.

2. Fiat money

The type of money that doesn’t have an inherited value is known as fiat money. It is known globally and can be traded or converted to other currencies with a particular matter related to and regulated by a government.

It can be found in paper money, coins, and banknotes. 

Cash liquidity 

As mentioned before, Cash is a liquid asset used for payments. It is also an essential asset in finance. Significant works are centered around it, like starting your own company. It would be best if you had the capital to support the work.

After opening the company, you need another investor to help grow the company more by butting their money into the company's capital and then getting dividends each time.

Cash is an essential asset in finance, and it has the following uses:

  •  It is used as a store of value or to make payments.
  •  It can be invested to make a return on capital (interest) over time.
  •  It can be used as collateral for loans or to borrow money from banks.
  •  It can be exchanged for other currencies at the current exchange rate.

Cash liquidity is the degree to which an entity can access Cash on short notice. In other words, it is a firm or individual’s ability to meet immediate cash needs.

The liquidity of a corporation’s assets is estimated by how efficiently currency can be converted into other currencies without incurring losses in value. 

Liquidity ratios are indicators of a company’s ability to pay its short-term debts and obligations.

A high level of cash liquidity gives a company the freedom to make significant investments and take advantage of opportunities as they arise.

On the other hand, low-level cash liquidity can make it difficult for companies to take risks and may lead them into bankruptcy if they cannot secure additional financing.

So liquidity plays a big role in strengthening a corporation's prosperity. Having various cash incomes can be a major factor in the strength of the company’s net assets.


Cash is the most liquid asset globally. It can be turned into any type of currency anytime and anywhere.

There are three wide varieties of cash liquidity:

Issues of cash

Cash is important for countries, companies, and individuals, as it represents a safe trading system between humans.

Money is the medium of deciding the prices of goods, services, gas prices, electricity, and assets. The currency's value changes every period and keeps increasing and decreasing. 

Managing money is a great issue as many illegal acts are related, like money laundering and over-printing cash.

As money gets printed in a limited number, the currency doesn’t lose the great value of the currency name. 

Top 10 strongest countries in 2022:

  • British Pound Sterling Currency (GBP)
  • Swiss Franc (CHF)
  • European Euro (EUR)
  • US Dollar (USD)
  • The Canadian Dollar Currency (CAD)

World economies depend on each other if any global event occurs, like a pandemic, war, or natural disaster, it will affect not only that country but also the economic state of others. 

The companies explore the problems with money and try to provide the best solutions, like enhancing the bank's security systems by setting stronger Authentication to the user's bank account.

After covering most aspects around money and the good and the bad days of currency performance in the world as a society, in the business and financial sector, and the economy as a whole.

The conclusion is that money is still considered a core value as you can get many things using it for products, goods, services, buildings, and land. In addition, it can be used for personal and business purposes.


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Researched and authored by Reham Maher | Linkedin

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