My tutor told me even a profitable of media company could not avoid bankrupt because lack of cash flow. The company was succes to sale the magazine but it was fail to collect the receivable. The magazine was quite famous but for a moment. The company could not publish it again because they had no enough cash to pay the print, journalist, marketing, general expense, etc. 

Cash flow is essential for a company like blood in human. The company could be bankrupt if it lack of cash flow.

The company should be able to manage cash flow in and cash flow out. The cash flow should be positive or the cash inflow should be higher than the cash outflow.

Cash inflow is cash that the company has received. For example, product and service revenue, rent revenue, and other revenue. Meanwhile, cash outflow is cash that the company has spent. For example, suppliers, employee, interest, tax and advertising.

Cash flow is also important for security analysts, creditor, investor, auditors and management. The security analysis often use it for bankruptcy prediction, credit analysis, earning quality assignment, expansion policies and solvency forecast. 

There is two kind cash flow statement i.e. the direct method (inflow-outflow method) and the indirect method. Most company use the indirect method because the report is easy to understand.

1. Collect the cash inflow data and cash outflow data. Do not use the deferred or non cash transaction.j

2. Sum net income with depreciation and amortization. You can also add gain sale on asset.

3. Add the operating activity items which increase cash like increasing debt, decreasing receivable,etc. Meanwhile, you should decrease item which decrease your cash like decreasing debt,  buy raw material, spend general expense, etc.

4. Then add the investing activities like purchase of equipment or sale of equipment. A company may add equipment for raising the productivity or replacing the broken equipment. Sometimes, the company also sell the old equipment that does not work well. If the company could sell higher than market value, you will get gain and reversely.  

5. Last, add (decrease) the financing activities item such as mortgage payable, preferred stock, dividend, etc.

6. Add with beginning cash to check the balance of ending cash. 

Alternative two, you can make direct cash flow method

1. Calculate the cash receipt from customers by decreasing sales with increase receivable.

2. Calculate the cash paid for inventories.

3. Calculate paid for operating expense such as selling and general expense less decrease in increase prepaid expenses and less decrease in decrease accrued expenses.

Note : Use your right logical in making cash flow statement. For example, an increase of receivable could decrease your cash inflow. Reversely, an decrease of receivable will increase your cash inflow.