Learning outcomes• Understand the concept of cash flow• Differentiate between cash and profit• Calculate cash flow• Drivers of cash flow• Understand how working capital affects your cash flow• Analyze operating and net operating cycle• Understand how your business and sector affects your cash flow• Understand the advantages of equity and debt financing• Understand the concepts of factoring, sale and leaseback, leasing• Differentiate between finance and operating leases
Roots = Financing ActivitiesTrunk & Branches = Investing ActivitiesFruit = Operating ActivitiesBusinesses are like Fruit Trees !
Main conclusions by analysts after thecollapse of large firms:ConclusionsCash is the onlycertain reality infinancialreporting. This iswhy cash is KINGCurrent cashposition andfuture expectedcash flow are themaindeterminants ofthe short termsurvival of thecompanyNumbers in theP&L and BalanceSheet requirejudgmentbecause they canbe highlymanipulated
What are the main drivers of cashflow?Payment toCreditors / AccountpayableStock Levels /InventoryCollection ofDebtors / AccountreceivableCapital ExpenditureDrivers ofcash flow
There are 3 main methods that can helpyou evaluate your capital expenditure:
How to ensure your overseas cash flow?(1/2)Risks associatedwith overseassalesDifference in distanceDifference in time zonesDifference in languageForeign exchange riskSince overseassales are morerisky thanhome salesyou should belooking forhigher marginsto compensatefor the higherrisks.
Ways to decreaseoverseas cash flowrisks, ensure yourcollection of cashflow, and help youcollect your cashmore quicklyCreditInsuranceBankDraftLetter ofCreditHow to ensure your overseas cash flow?(2/2)
Positive WCDecrease operatingcash flowNegative WCIncrease operatingcash flowWorking capital = (change in AR + change in Inventory) – (change inAP)What is working capital? (2/2)
• Operating cycle = number of days of inventory + number of days ofreceivablesOperating cycle for Company X = 42 + 17 = 59 days (Ref. slide 29 & 36)Thus, it takes the company 59 days from its purchases of inventories to itscollection of cash.• Net operating cycle = operating cycle – number of days of payablesNet operating cycle for Company X = 59 – 31 = 28 days (Ref. slide 46)Thus, it takes Company X 28 days to collect cash from customers afterpaying its dues to it suppliers.Operating and Net Operating Cycles(1/2)
Why is the role of a finance managerimportant for your company’s success?Talk toprospectiveinvestorsTalk to thebankmanageraboutfundingrequirementsKeep properaccountingrecordsProduce the3 financialstatementsReportperformanceto regulatoryauthoritiesDay to daycash flowmanagementForecastingPreparingfinancial dataformanagementLocalaccountingfirmSelf employedqualifiedaccountantwhospecializes inhelping smallfirms.Experiencedaccountantwho wantsto work parttime
Thank You For Coming Today!Tel: +961 1 385 825 / website: www.bsf-lb.comEmail: email@example.comFacilitator: Antoine Tabbakh/BestSolutionFinance Company/bsf #bsfbeirut