This week I’ve been writing about an analogy that connects wealth to health. Two days ago I wrote about your Habit Scorecard (Balance Sheet) and yesterday I wrote about your Daily Schedule (Income Statement). Today I want to address how these to connect to each other.
The Statement of Cash Flow is where the Balance Sheet and Income Statement interact with each other. This financial statement is useful to understanding a company’s ability to cover its expenses in the near term. It has line items like, “Cash Flow from Operating Activities”, “Investing Activities”, and “Financing Activities”.
It’s my personal belief that the Statement of Cash Flow is the least useful of the three because it just pulls information from the Balance Sheet and Income Statement. As long as you can see the inflow and outflow of cash from the other two financial statements, I don’t ever look at a Statement of Cash Flow.
Instead, I just draw arrows to make things simpler for me to understand. In our analogy of the Habits Scorecard and Daily Schedule, I drew arrows in the video below to help you derive information about your overall health.
Now, I’m sure that I could carry this analogy on further, but suffice it to say that this “Statement of Energy-Flow” tells me your body’s ability to handle upcoming stress from certain activities.
I’m curious of your thoughts, however! Was this helpful? Was it too confusing?
Let me know.