Cash flow is the lifeblood of a business. Effective cash flow management is vital to a business's success. Understanding how to calculate and project cash flow through various formulas allows businesses to properly manage their finances and address potential cash flow problems before they become critical issues.

1. SCHOOL OF GRADUATE AND PRPFESSIONAL STUDIES- MBA
PROGRAM
FIN 069: FINANCIAL MANAGEMENT

2. PART I
PART II
PART III

3. I Introduction
Joness Angela Basa
Diana Rose V. Meneses
Rina Eloisa Laborde
Presenters
What is Cash Flow?
Importance of Cash
Flow
Managing Cash Flow
Managing Cash Flow
How to Calculate Cash
Flow
1 2 3 4 5

4. PART I
Cash flow is the money that streams in and out of the business—and
it’s a key indicator of the company’s overall financial health. The term
cash flow is used to describe the amount of cash that is generated or
spent within a certain time frame.
1 2 3 4 5
What is Cash Flow?
Importance of Cash
Flow
Managing Cash Flow
Managing Cash Flow
How to Calculate Cash
Flow
Presenters
Cash flow is the lifeblood of a business.

5. PART I
Cash flow is important to a small business because it shows how
much money is actually moving in and out of your company, not how
much money you're awaiting from accounts receivable. If your cash
flow is positive, you'll know you're earning more money than you’re
spending, and you'll have cash on hand to cover payroll, equipment
purchases and upgrades, loan repayments and other key business
needs. If your cash flow is negative, you may find yourself unable to
pay your employees and suppliers, cover your monthly rent and have
the money needed for any other daily business costs.
1 2 3 4 5
What is Cash Flow?
Importance of Cash
Flow
Managing Cash Flow
Managing Cash Flow
How to Calculate Cash
Flow
Presenters

6. PART I
Cash flow management is a set of practices and strategies to help
you track, analyze and improve the financials of your business.
The goal of cash flow management is to get you in the “green,”
also known as positive cash flow, where you have more money
coming in than going out.
1
In commerce and industry, cash is king.
2
1 2 3 4 5
What is Cash Flow?
Importance of Cash
Flow
Managing Cash Flow
Managing Cash Flow
How to Calculate Cash
Flow
Presenters
Successful financial management involves balancing three
elements: accounts receivable (what you are owed by the
customer), accounts payable (what you owe to suppliers)
and shortfalls (the amount of money you owe that exceeds
your available funds).
3

7. PART I
Cash flow management is vital to your business’s
success. If you can accurately project cash flow, you will
steer your company in the right direction
1
Every business has high and low seasons; understanding
upcoming expenses for employee overtime, replacement
equipment and other needs goes a long way to ensure your
business is well positioned to handle any bump in the road.
2
1 2 3 4 5
What is Cash Flow?
Importance of Cash
Flow
Managing Cash Flow
Managing Cash Flow
How to Calculate Cash
Flow
Presenters

8. PART I
One of the most important aspects of managing cash flow is understanding how
to calculate it. There are three main formulas that can help you calculate cash
flow: free cash flow formula, operating cash flow formula and cash flow
forecast. Each formula serves a different purpose.
1
Net income + Depreciation ÷ Amortization - Change in working capital -
Capital expenditure = Free cash flow
Depreciation + Operating income - Taxes + Change in working capital
= Operating cash flow
Beginning cash + Projected inflows - Projected outflows = Ending cash
= Cash flow forecast
2
1 2 3 4 5
What is Cash Flow?
Importance of Cash
Flow
Managing Cash Flow
Managing Cash Flow
How to Calculate Cash
Flow
Presenters

9. PART I
Determining when you'll receive – and spend – money is part
of the budgeting process. To successfully project cash flow,
assess your prior year's numbers as a basis of cash flow for
the following year. Then, adjust for anticipated changes, such
as new pricing, and more personnel and funding sources.
Projecting CF
CF Statement
Positive CF
CF Deficit
6

10. PART II 1 2 3 4 5
Preparing a CF
Statement
Positive CF
CF Deficit
Cash Flow Analysis
.
Types of Cash flow
5 Steps to CF Analysis
A cash flow analysis determines a company's working capital
the amount of money available to run business operations and
complete transactions.

11. PART II 1 2 3 4 5
Preparing a CF
Statement
Positive CF
CF Deficit
Cash Flow Analysis
.
Types of Cash flow
5 Steps to CF Analysis
OPERATING
ACTIVITIES
FINANCING
ACTIVITIES
INVESTING
ACTIVITIES

12. PART II 1 2 3 4 5
Preparing a CF
Statement
Positive CF
CF Deficit
Cash Flow Analysis
.
Types of Cash flow
Direct Method - takes all cash collections
from operating activities and subtracts all of
the cash disbursements from the operating
activities to get the net income
Indirect Method - starts with net income
and adds or deducts from that amount for
non-cash revenue and expense items.
5 Steps to CF Analysis

13. PART II 1 2 3 4 5
Preparing a CF
Statement
Positive CF
CF Deficit
Cash Flow Analysis
.
Types of Cash flow
5 Steps to CF Analysis
How do you get positive cash flow? Sales are obviously the best
way for a business to gain cash flow. If you're not generating
sales, you're not really a business. Of course, saving money in
operational expenses helps, too. It's important to have detailed
budgets and to curb unnecessary spending.

14. PART II 1 2 3 4 5
Preparing a CF
Statement
Positive CF
CF Deficit
Cash Flow Analysis
.
Types of Cash flow
5 Steps to CF Analysis
In the event of a cash flow deficit, these are some of your
options:
• Apply for a loan from a banking institution or individual.
• Apply for a line of credit from a bank.
• Speed up the collection process.
• Finance the purchase of equipment through leasing or
loans.
• Liquidate assets.
• Delay payments to vendors. Sometimes you may have a
surplus of cash. That money can affect future
opportunities, so you don't want it to sit around..

15. PART II 6
Preparing a CF
Statement
Positive CF
CF Deficit
Cash Flow Analysis
.
Types of Cash flow
5 Steps to CF Analysis
• Aim for positive flow
• Be circumspect about positive cash
flow
• Analyze your negative cash flow
• Calculate your free cash flow
• Operating cash flow margin build
trust

16. PART III
Main Causes of CF
Problems
How to Manage CF
Problems
CF Management
Advantages
Limitations of CF
Management
Conclusion
1 2 3 4 5
• Low profits or (worse) losses
• Too much production capacity
• Excess inventories held
• Allowing customers too much credit &
too long to pay
• Overtrading – growing the business too
fast
• Seasonal demand

17. PART III
Main Causes of CF
Problems
How to Manage CF
Problems
CF Management
Advantages
Limitations of CF
Management
Conclusion
1 2 3 4 5
 Use reliable cash flow forecasting
 Keep costs under control
 Manage working capital effectively
 Choose the right sources of finance

18. PART III
Main Causes of CF
Problems
How to Manage CF
Problems
CF Management
Advantages
Limitations of CF
Management
Conclusion
1 2 3 4 5
• Allows estimating the cash profits and not just
profits from outstanding incomes and credit
sales.
• It helps in detecting cash embezzlement.
• It allows in speeding up the working capital
cycle.
• It helps in rewarding such debtors that make
quicker payments.
• It speeds up the operations of an organization.

19. PART III
Main Causes of CF
Problems
How to Manage CF
Problems
CF Management
Advantages
Limitations of CF
Management
Conclusion
1 2 3 4 5
• Fails to Present Net Profit
• Not a substitute to Income
Statement
• Industry Comparison not
possible
• Does not Properly Assess
Liquidity position

20. PART III
Main Causes of CF
Problems
How to Manage CF
Problems
CF Management
Advantages
Limitations of CF
Management
Conclusion
1 2 3 4 5