Cash flow, entrepreneurship, educators, cash transactions


It is a common mantra of entrepreneurs that cash is king, and educators in entrepreneurship have stressed the need to make the understanding of cash flows a central theme early in a student’s education (Leauby and Wentzel, 2012; Pearl, 1986; Wouters, 2008). However, the ability to teach entrepreneurship students how to develop a statement of cash flows is viewed by many as a difficult task for educators. Many students struggle to understand the indirect method of modeling cash flows (Vent and Cocco, 1996) because the method of constructing the cash flow statement is not intuitive (Hodder, Hopkins, and Wood, 2008). Drawing upon cognitive load theory, I discuss the need to have a significantly simpler method to introduce the cash flow statement to entrepreneurship and other non-accounting majors in a format that enables students to more easily understand the impact of cash and non-cash transactions. I then present a method by which students with limited accounting acumen construct a simple cash flow statement using basic spreadsheet skills.

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