cash-flow-BOOKKEEPING.11-ACCOUNTING.pptx

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1. CASH FLOW ANALYSIS CREATED BY MARS HERSHEY S. PAQUERA 07/14/2024

2. 01. 02. 03. 04. CASH FLOW ANALYSIS KEY COMPONENTS OF CASH FLOW ANALYSIS EXAMPLES INTERPRETATIONS TABLE OF CONTENT This is the material point that will be delivered in the presentation.

3. MEANING: is a fundamental aspect of financial analysis that focuses on evaluating the movement of cash into and out of a business during a specific period. CASH FLOW ANALYSIS It is essential for understanding a company's capacity to generate cash to cover its operational expenses, debt repayments, and investment needs.

4. Operating Cash Flow (OCF) Investing Cash Flow Financing Cash Flow Free Cash Flow (FCF) 01. 02. 03. 04. KEY COMPONENTS OF CASH FLOW ANALYSIS

5. HERE ARE THE EXAMPLES TO ILLUSTRATE THEIR SIGNIFICANCE NEXT SLIDE

6. DEFINITION: EXAMPLE: OPERATING CASH FLOW (OCF) Operating cash flow represents the cash generated or used by a company's core business operations. In a given period, a company has a net income of $100,000, depreciation expenses of $20,000, and a decrease in working capital of $10,000. Calculate the operating cash flow.

7. GIVEN VALUES: FORMULA: OPERATING CASH FLOW (OCF) Net Income = $100,000, Depreciation Expense = $20,000, Changes in Working Capital = $10,000 Net Income + Depreciation & Amortization - Changes in Working Capital. CALCULATION: $100,000 + $20,000 - ($10,000) = $110,000

8. The operating cash flow for the manufacturing company is $110,000, indicating that the core business activities are generating a positive cash flow of $110,000. INTERPRETATION:

9. DEFINITION: EXAMPLE: INVESTING CASH FLOW A company sells equipment for $50,000 and purchases new machinery for $30,000. Calculate the net investing cash flow. Investing cash flow reflects the cash flows related to the purchase or sale of long-term assets.

10. GIVEN VALUES: FORMULA: INVESTING CASH FLOW Equipment Sale = $50,000 New Machinery Purchase = $30,000 Investing Cash Flow = Cash Inflows from Asset Sales - Cash Outflows from Asset Purchases CALCULATION: $50,000 - $30,000 = $20,000

11. INTERPRETATION: A net investing cash flow of $20,000 indicates the company's net cash outflow from investing activities.

12. DEFINITION: EXAMPLE: FINANCING CASH FLOW Financing cash flow represents cash inflows or outflows from activities related to debt or equity financing. It shows how the company raises and repays capital. Financing cash flow shows the cash inflows or outflows from activities associated with debt or equity financing.

13. GIVEN VALUES: FORMULA: FINANCING CASH FLOW Bonds Issued = $100,000 Bank Loan Repayment = $50,000 Financing Cash Flow = Cash Inflows - Cash Outflows from Financing Activities CALCULATION: $100,000 - $50,000 = $50,000

14. INTERPRETATION: A net financing cash flow of $50,000 indicates the company's net cash inflow from financing activities.

15. DEFINITION: EXAMPLE: FREE CASH FLOW (FCF) If a company has operating cash flow of $150,000, capital expenditures of $50,000, and interest expenses of $20,000, the free cash flow would be $80,000 ($150,000 - $50,000 - $20,000). Free cash flow represents the cash available to the company after meeting capital expenditures and operating expenses.

16. GIVEN VALUES: FORMULA: FINANCING CASH FLOW Operating Cash Flow = $150,000 Capital Expenditures = $50,000 Interest Expenses = $20,000 FCF = CALCULATION: $150,000 - $50,000 - $20,000 = $80,000 Operating Cash Flow - Capital Expenditures - Interest Expenses

17. INTERPRETATION: A free cash flow of $80,000 indicates the amount of cash the company has available for other purposes after meeting its expenses.

18. Thank you!