Planning and Managing your Business ash flow part 2


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Planning and Managing your Business ash flow part 2

  1. 1. Planning and Managing your business cash flow -Part 2- AdvancedPowerful tools and techniques based on real experience
  2. 2. Learning outcomes• Understand the 3 cash flow activities• Be able to differentiate between different cash flow formats• Analyze your cash flow statement• Understand the importance of forecasting• Understand short term and long term forecasting• Make short term and long term forecasts• Understand the concept of “free cash flow”• Calculate free cash flow to firm (FCFF) and free cash flow to equity (FCFE)• Understand the concept of “cost of trade”• Calculate the NPV of the cost of trade and make the right decision
  3. 3. Objectives of a well designed cash management system (1/2) Keep corporate Increase return funds safe under Finance yourfrom excess/idle varied economic long term cash situations expansion Objectives Keep cash Increase available forprofitability of operational operations needs Control cash inflows and outflows
  4. 4. What are the sections of the cash flow statement? Day to day Operating cash activities that flow create revenue Purchase and sale Cash Flow Investing cash flow of investments Obtaining or Financing cash flow repayment of capital
  5. 5. Cash flow analysis; Cash Flow Ratios Formula What it measuresPerformance ratiosCash flow to revenue Operating cash flow / Cash generated per dollar Revenue of revenueCash return on assets Operating cash flow / Cash generated from all Average total assets resources Cash to income Operating cash flow / Cash generating ability of Operating income operations Coverage ratios Debt coverage Operating cash flow / Total Financial risk and financial debt leverage Interest coverage (Operating cash flow + Ability to meet interest Interest paid + Taxes paid) / obligations Interest paid Reinvestment Operating cash flow / Cash Ability to acquire assets paid for long term assets with operating cash flows
  6. 6. Short Term Forecast Shows how much Helps avoid Determine the cash cash is available scheduling large requirements for for temporary payments at times financial investments when cash position operations is low Helps minimize the company’s cost ofGreat accuracy maintaining credit lines and borrowing Recommended method for short Determine the Short term term forecasting is need for short- forecasting the cash receipts term financing and disbursement method
  7. 7. Long Term Forecast Helps decide how much Helps decide how long Shows the long term money should be will it take to repay growth borrowed the borrowed fundsAssist management in Shows how financing securing the funds decisions affect thenecessary to finance capital structure corporate plans Long term forecasting Helps determine whatLess detailed and less projects should be accurate approved, deferred, or abandonedNote: Both direct and indirect method can be used for long termforecasting, and it is best to do a forecast of both, since each one will allowyou to see your cash flow from a different angle.
  8. 8. Thank You For Coming Today! Facilitator: Antoine TabbakhTel: +961 1 385 825 / website: Email: /BestSolutionFinance Company/bsf #bsfbeirut