Analyzing cash flow6/19/2023 *Some are required and some are discretionary. – Contributions from Schedule K-1 (for LLCs and partnerships) + Cash distributions from Schedule K-1 (for S corps, LLCs, partnerships)* Salary + interest/dividend income +/- Rental cash flow On the personal side, the calculation is as follows: On the business side, cash flow is fairly straightforward: Global cash flow should include all of an owner’s business and personal income/salary, debt and other financial obligations, and liquidity. Otherwise, there’s a good chance you will get an incomplete (and possibly very inaccurate) picture of the business’s and owner’s true financial situation. It’s more critical than ever that lenders carefully examine borrowers’ complete business and personal financial situations when analyzing small business loan requests and integrate them into what is referred to as global cash flow. As a result, there is a significant interrelationship among the income, expenses and cash flow of most small businesses and the business owner’s personal finances. In addition, many owners are now financing their businesses via personal credit cards and home equity lines of credit, further blurring the line between personal and business affairs. That’s because most small businesses are now established as pass-through entities (S corps, LLCs or partnerships), with some items of business income and expenses passing through to the owner’s personal tax return. For most small business owners, there’s a very fine line between their personal and business financial affairs.
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