Cash Flow – Cash Flow Notes

John asked:


How to find out that if a comany is managing its cash flow adequately?

Plus, how to support it with the informationm from the statement of cash flows?
Thanx in advance

Zachary Wygand

dandyta asked:


Im in the process of determination of the value of a company in south america, i have the cash flow projection, but i haven’t an interest rate to discount the projected cash generated.

Anthony

In the normal course of business, cash comes in as income and goes out as expense. This flow of receiving and spending cash for commercial purposes is known as the cash flow. Since the core objective of any business is to generate profit, the flow of cash is important as it directly affects the bottomline of the company.

Uses Of Cash Flow

Cash flow is used:

to evaluate the liquidity of a company

to find out ratios like the net present value and the internal rate of return

to act as a validating input for net income created by accrual accounting methods

Types Of Cash Flow

Cash flow can be:

operational cash flow (the flow of cash for normal operation of the business)

financing cash flow (the flow of cash for financial activities like loans, dividends, stocks, etc.)

investment cash flow (the flow of cash for investments like plant & machinery, land, and other long term capital expenditures)

Cash flow Constrictions

Cashflow can become constricted due to the extension of the credit period of your invoices by your customers. The more your sales increase and/or the more the credit period increases, the more constricted your cashflow becomes. The effect of cashflow clogging is seen sharply in operational cash flow. Until the cash from the previous and present sales rolls in, inventory cannot be purchased, orders cannot be executed, and business almost comes to a standstill.

Cash flow Funding

To solve this most common commercial problem, finance companies offer solutions to provide your business with a steady source of funds that increases in direct proportion with your sales. The finance offered by the finance companies to improve the cash flow is known as cash flow funding, which is typically in the form of account receivables funding or export receivables finance or purchase order finance.

Account Receivables Funding

Account receivables funding is also known as invoices funding or factoring. Here, approximately 85% of the value of your invoices is paid immediately, with the remaining 15% less the fees of the finance company paid to you when your customer honors your invoice.

Export Receivables Finance

To expand your overseas business profitably, some finance companies offer to pay almost 80% of your export receivables. The remaining 20% minus the fees of the finance company is paid to you after your overseas buyer pays your receivables. This enhances your cashflow during the work-in-progress and shipping stages. Moreover, the chasing and collection of the receivables may be done by the finance company as they have a multilingual staff, which is extremely well-trained in the laws, customs, and procedures of different countries.

Purchase Order Finance

Here, funds are provided against your purchase orders. The finance company can directly pay to your suppliers in cash, thereby availing huge cash discounts for your business. It can also provide letters of credit and supplier guarantees. This facilitates the smooth execution of your purchase order.



By: Amelie Mag

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Alejandro

Confused about life asked:


How do I calculate the Present Value Ratio (PVR) from the IRR and a cash flow? In the cash flow, I have made an investment in a business and am earning income from the investment. How can I do this?

Rochel Struck

curious asked:


Is there a software program or an equation to figure out how much down payment to put on a property, given the amount of rent income anticipated, minus all the expenses (taxes, upgrade, etc.) to produce at least a balanced or even a positive cash flow?

Shiela Abston

joelfromjhu asked:


I am looking for the 2006 cash flow margin averages for the major oil and gas intergrated industry for a school project. can you please tell me what it is and include a link on the source,.

Jamie Bredeson

suhail_08 asked:


How does a cash flow forecast help a business?

Guillermo Burton