Before starting, you should understand why the projection is required. A carefully considered and well-presented projection could meet many of these needs. In preparing your cash flow, it's important that you keep your feet firmly planted on the ground. Cash flow from operating activities is derived from the buying and selling of goods and services, and the management of the elements of working capital. Cash flow from financing activities relates to proceeds from and repayment of long-term loans or mortgages payable, and raising money through the issuance of capital stock and providing a return to your investors.
Past performance is usually the best predictor of future results.
Carefully analyze all aspects of your operations. Know your past record, and understand current and future trends in sales and marketing, production and distribution, administration, human resources, financing and capital equipment requirements. However, this projected profit does not usually represent your cash flow from operations. These are some of the questions that should be answered when quantifying a capital investment plan in terms of cash flow from investment activities. But once you've decided, a cash flow projection must reflect those decisions for outlays of cash to make investments and receipt of cash from the sale of redundant assets.