Fixed assets in cash flow. Cash flow analysis. Indicators of the organization's cash flow statement

Cash flow management involves recording cash flows, analyzing and estimating cash flows, and developing a cash flow budget. Management covers the key areas of the organization's activities, including the management of non-current and current assets, equity and borrowed capital.

One of the main conditions for the normal operation of an organization is the availability of funds, which can be assessed by cash flow analysis.

The main task of cash flow analysis is to identify the reasons for the lack (excess) of funds, determine the sources of their income and areas of use.

The purpose of the analysis is to highlight, if possible, all transactions affecting cash flow.

One of the conditions for the financial well-being of an organization is the influx of cash. However, an excessive amount of cash indicates that the organization is actually suffering losses associated with the depreciation of money, as well as the missed opportunity for its profitable placement.

The main goal of cash flow analysis is to assess the organization's ability to generate cash in the context and within the time frame necessary to implement planned expenses.

Let's analyze the cash flow of JSC Poultry Farm Druzhba. Accounting data is generated based on the indicators of Form No. 4 “Cash Flow Statement” for the reporting period. The analysis data will be displayed in Table 10.

In 2010, the organization receives cash from current operations and financing activities, while it generates positive cash flow only from current activities.

Table 10 - Cash flow by type of activity of JSC Poultry Farm Druzhba, (thousand rubles)

Net cash from current activities in the analyzed period is characterized by positive dynamics compared to previous years. Compared to 2008, the flow increased by 17,752 thousand rubles, compared to 2009 by 14,537 thousand rubles.

Net cash from financial activities in 2010 compared to 2009 had a positive trend in the amount of 10,614 thousand rubles, but at the same time, compared to 2008, there was a decrease in the result obtained from activities in the amount of 15,871 thousand rubles .

Investment activities were carried out according to reporting only in 2009 and had a positive result, which allowed the organization to have a net increase in cash this year. However, in 2010, the organization abandoned investment activities and therefore negative dynamics of 26,185 thousand rubles were noted. In this regard, there is a general decrease in cash balances for 2010 by 178 thousand rubles.

Let's consider the structure of cash receipts and expenses for current activities and its dynamics for 2010 compared to previous periods, as well as the dynamics of the factors that most influenced cash receipts and expenses.

During the analysis, you should consider the structure (percentage) of cash receipts for the period. The data will be displayed in Table 11.

As evidenced by the data given in Table 11, the cash inflow from current activities is primarily funds received from buyers, customers in 2010 they amounted to 99.47%, in 2009 97.84%, 2008 99 .54%. Budget subsidies received play a minor role in total revenues.

The main outflow of funds from current activities is payment for purchased goods, works, services (in 2010 77.52%), wages (in 2010 14.92%), settlements with the budget for taxes and fees (in 2010 5.26%)

Comparing the indicators for three years, we observe a tendency towards an increase in payments for wages in 2008 they amounted to 9.69%, in 2009 13.38%, and in 2010 already 14.98% and also an increase in the tax burden in In 2008 it was 3.57%, in 2009 4.52%, and in 2010 it was already 5.26%. Cash outflow due to other expenses is decreasing annually. In 2008 they were 0.36%, in 2009 0.28%, and in 2010 already 0.15%.

A positive aspect in the organization's cash flow is the excess of the inflow of funds over their outflow in 2010 by 3,724 thousand rubles. This is financial stability.

The analysis also shows that a normal situation has developed in the organization when the inflow of funds from current and investment activities exceeded the outflow of funds.

Table 11 - Structure of cash receipts and expenditures for the current activities of JSC Poultry Farm Druzhba

Similar to current activities, the first step of the analysis is to study the overall picture of the factors influencing changes in the cash balance due to both investing and financing activities. Then the detailed structure of cash receipts and expenditures from financial activities and its dynamics for the reporting period compared to the previous period (the same period of the previous year) are examined. On this basis, factors are determined whose influence on these indicators in the reporting period was a priority.

To do this, we will analyze the funds of this organization by type of activity. The calculation data will be reflected in Table 12.

Table 12 - Cash flow of JSC Poultry Farm Druzhba by type of activity (thousand rubles)

As can be seen from the calculations given in Table 12, the main ongoing cash flow is the influx of cash from current activities, in 2008 it was 90.9%, in 2009 89.9%, and in 2010 already 93.0% . The majority of cash outflows are also carried out from current activities. Every year, the share of outflows for this type of activity decreases slightly.

Investment activities were carried out in the organization, according to the cash flow statement, only in 2009 and amounted to 10.1% of total inflows. There was no outflow of money for all three years analyzed.

Cash flow from financing activities in 2010 was 1.5% lower than outflow. What is a negative point in the organization's cash flow. Analyzing the cash flow statement, we note that the outflow of funds was caused by the repayment of loans and credits (without interest) of 20,174 thousand rubles, which amounted to 92.1% of the total cash expenditure for financial activities. The influx of money consists of 100% proceeds from loans and credits. In 2009, there was only an outflow of cash from financing activities, and in 2008, a profit was made in the amount of 11,969 thousand rubles.

In 2010, compared to 2009 and 2008, the organization’s activities reduced the inflow of cash, but cash outflow also decreased annually.

As a result, for the organization in 2010, in the cash flow there is an excess of the outflow of funds over their inflow by 178 thousand rubles. A situation has arisen in the organization where, although the outflow of funds throughout the enterprise as a whole has decreased by 1,116 thousand rubles compared to 2009, the influx of funds from activities is insufficient and has also decreased by 2,150 thousand rubles.

A necessary condition for financial stability is the ratio of inflow and outflow of funds within the framework of current activities, which ensures an increase in financial resources sufficient to make investments. As we see in 2010, this level of financial stability has not been achieved. However, current activities in the reporting period generate positive cash flow, which allows the organization to make financial and investment investments, which deserves a positive assessment.

It can be argued that cash balances at the end of reporting periods are stable and do not change significantly during the period under review.

Let's take a closer look at the cash flow in Table 13.

Table 13 - Total cash flow of JSC Poultry Farm Druzhba

Regarding the dynamics of balances in the current account, we can say that it fully corresponds to the profile of the organization. In general, the emerging trend in the amount of cash should attract the closest attention of management: it should be enough to carry out current business activities, but it should not fall out of cash flow.

Much attention should be paid to the dynamics of changes in accounts payable and receivable. It is desirable that accounts payable be slightly higher than accounts receivable. This is due to the fact that accounts receivable are money temporarily diverted from circulation, and accounts payable are funds involved in circulation. It is also undesirable to have a strong excess of accounts payable over accounts receivable, because in the event of a demand from creditors (especially for short-term debt) to repay the debt, the organization may be made dependent on the financial condition of the debtors.

As can be seen from Table 13, accounts payable over the course of three years increased by 151% or by 44,609 thousand rubles, which exceeds the absolute decrease in cash, i.e., we can make a preliminary conclusion that the organization had surplus cash that was not participated in the turnover, i.e. they were “frozen”. An increase in accounts receivable by almost 36%, which in absolute terms amounted to 2,786.0 thousand rubles. is a positive fact. However, we are observing undesirable statistics that take the form of an annual significant increase in accounts payable over accounts receivable.

This state of affairs allows us to draw the following conclusions:

• - the ratio of accounts payable and receivable does not meet the requirements of the financial independence of the organization;
• - fluctuations in the amount of funds in the cash register and in the current account indicate stability in receiving and especially spending funds;
• - the situation can be changed by analyzing the main channels of receipt and directions of use of funds, taking as a basis the “Cash Flow Statement” of the annual reporting.

The report explains the changes that have occurred with one of the components of the financial statements - cash - from one balance sheet date to another, that is, it allows users to analyze current cash flows, estimate their future receipts, assess the organization's ability to repay its debt and pay dividends, analyze the need to attract additional financial resources.

A necessary condition for financial stability is the ratio of inflow and outflow of funds within the framework of current activities, which ensures an increase in financial resources sufficient to make investments. The main disadvantage of the direct method of cash flow analysis is that it does not reveal the relationship between the obtained financial result and changes in cash in the organization’s accounts.

The amount of cash inflow in the analyzed organization differs significantly from the amount of profit received. As follows from Form No. 2 “Profit and Loss Statement” for 2010, the analyzed organization received a profit from sales in the amount of 310,574.00 thousand rubles, and its net profit amounted to 1,190 thousand rubles. At the same time, the organization’s funds decreased during the study period by 178 thousand rubles.

Profit (loss) reflected in Form No. 2 is formed in accordance with accounting principles, according to which expenses and income are recognized in the accounting period in which they were accrued (regardless of the actual cash flow). Its value is influenced by:

• - availability of future expenses;
• - the presence of deferred payments, i.e. accrued ones, which increase the cost of production, but there is no real outflow of funds;
• - current and capital expenses.

Current expenses are directly included in the cost price, and capital expenses are reimbursed over a long period of time (depreciation), but they are accompanied by a significant outflow of cash.

The source of increasing funds can be not only profit, but also borrowed funds.

The acquisition of long-term assets does not affect profits, but their sale changes the financial result.

The financial result is influenced by expenses not accompanied by cash flow (depreciation).

Changes in the composition of own working capital. An increase in the balances of current assets leads to an additional outflow of funds, and a decrease leads to their inflow.

The activities of an organization accumulating inventories are inevitably accompanied by an outflow of funds, however, until the moment the inventories are released into production (sold), the value of the financial result will not change.

The presence of accounts payable allows an organization to use inventory that has not yet been paid for.

An accountant, whose functions include the task of providing the management of an organization with information about the availability and flow of cash, must be able to explain the reason for the discrepancy in profit and changes in cash. For this purpose, cash flow analysis is carried out using the indirect method.

The indirect method is more common in world practice as a method of preparing a cash flow statement. It includes elements of analysis, since it is based on a comparison of changes in various balance sheet items for the reporting period, characterizing the property and financial position of the organization, and also includes an analysis of the movement of fixed assets, their depreciation and other indicators that cannot be obtained solely from the balance sheet data .

This method is based on the identification and accounting of transactions related to cash flows and the sequential adjustment of net profit, i.e., the initial element of the calculation is profit. For the analysis, in addition to Form No. 1 “Balance Sheet” (Appendix B), Form No. 4 “Cash Flow Statement”, Form No. 5 “Appendix to the Balance Sheet of the Enterprise” and general ledger data are used.

The indirect method consists in establishing the differences between the indicator of net profit (loss) of the reporting period, formed on the accrual basis and presented in the income statement, and the indicator of net cash from operating activities (increase in cash and cash equivalents for the period), calculated according to cash method based on balance sheet data (the difference between cash at the end and beginning of the reporting period).

An example of calculating a cash flow statement using the indirect method is given in Table 14.

Table 14 - Statement of cash flows using the indirect method

For the example under consideration, the data has been adjusted, changes in funds by type of activity will be: current activities + 3724 thousand rubles, investment activities - 0 thousand rubles, financial activities - -3902 thousand rubles. The overall change in cash obviously remained unchanged - -178 thousand rubles.

The compiled cash flow statement allows us to draw the following conclusions.

The main reason for the discrepancy between the obtained net financial result and net cash flow was the increase in accounts receivable (RUB 7,018 thousand) and short-term debt (RUB 29,040 thousand), which resulted in an outflow of cash.

Received net profit in the amount of 1190 thousand rubles. Almost all of it was used to pay off long-term borrowed funds.

The data in tables 11, 12 and 14 contain valuable management information in which both management and its shareholders (investors) are interested. With its help, the organization's management can monitor the current solvency, make operational decisions to stabilize it, and assess the possibility of additional investments. Lenders can form an opinion about the organization's adequacy of funds and its ability to generate the cash needed to make payments. Shareholders (investors), having information about the movement of cash flows in the organization, have the opportunity to more reasonably approach the development of a policy for the distribution and use of profits.

Drawing up a cash flow statement using the indirect method is most suitable for organizations that maintain accounting according to international financial reporting standards using the transformation method and do not have the ability to automate this process sufficiently. Using the indirect method, a cash flow statement can be compiled based on the income statement, the balance sheet at the beginning and end of the reporting period, as well as some additional data on flows that are usually used in transforming financial statements. Data from accounting systems about real cash flows is not required, and no automation of reporting is required. This method allows you to clearly show what cash content each line of the income statement has.

The main disadvantage of the indirect reporting method is the need to collect a large amount of information about non-cash items and changes in working capital. To obtain this information, an analysis of account turnover is required, since it is not included in the organization’s reporting. Also, to create a cash flow report using the indirect method, you need to have ready-made reports on the balance sheet, profits and losses, and changes in capital.

Analysis of cash flows by the direct method allows you to reveal in detail the flow of funds in the accounting accounts and draw conclusions regarding the sufficiency or insufficiency of funds to pay current liabilities, as well as the implementation of investment activities. However, the direct method does not show the relationship between the financial result (profit) and changes in the amount of funds in the organization’s accounts. To do this, an indirect method is used, the essence of which is to convert the amount of net profit into the amount of cash. Moreover, based on the fact that in the activities of each organization there are separate, often significant in size, types of expenses and income that reduce or increase its profit without affecting the amount of its funds. Therefore, in the process of analysis, the amount of net profit is adjusted in such a way that expense items that are not associated with the outflow of funds and income items that are not accompanied by their receipt do not affect the amount of net profit.

It is advisable to begin the analysis of cash flows using the indirect method with an assessment of changes in the state of assets and their sources according to Form No. 1 “Balance Sheet”. Then they evaluate how changes in each item of assets and liabilities affected the organization’s cash position and net profit. When analyzing the relationship between the obtained financial result and changes in funds, one should take into account the possibility of reflecting the actual receipt of funds in the income recorded earlier.

Depreciation does not affect the outflow of cash, but reduces the financial result. A decrease in profit is not accompanied by a decrease in cash; therefore, to obtain the real amount of cash, the amount of accrued depreciation must be added to net profit. These expenses reduce book profit but do not affect cash flow. If there is an increase in inventory, then the real cash outflow will be higher by the amount of expenses for the purchase of materials included in the cost of goods sold; profit will also be overestimated by this amount and must be adjusted, i.e. reduced.

The increase in inventories should be subtracted from the amount of net profit, and their decrease should be added to net profit, since we are overestimating the amount of cash outflow by this amount, i.e. we are underestimating profit. In fact, an increase in inventories does not entail an increase in cash to the same extent as an increase in profits. The algorithm for working with the cash flow statement is as follows - in the area of ​​current activities, the amount of net profit is adjusted to the following items: added to net profit: depreciation, decrease in accounts receivable, increase in deferred expenses, losses from the sale of intangible assets, increase in tax debt ; deductible: profit from the sale of securities, an increase in advance payments, an increase in inventories, a decrease in accounts payable, a decrease in liabilities, a decrease in bank credit.

In the investment activities section: the following are added: sale of securities and tangible non-current assets; deductible: purchase of securities and tangible non-current assets. In the field of financial activities: the following is added: issue of ordinary shares; deductible: redemption of bonds and payment of dividends.

Factors that change profit are costs included in the cost of production, changes in the volume of sales on credit, the accrual of taxes and dividends, etc. Reported profit is also adjusted by the amount of adjustments that do not reflect cash flows: depreciation of fixed assets and intangible assets; loss from the sale of fixed assets and intangible assets; profit from the sale of fixed assets; expenses for research and development work.

Cash flow analysis makes it possible to evaluate:

• - in what volume and from what sources the received funds were received, what are the directions of their use;
• - whether the organization’s own funds are sufficient for investment activities;
• - whether the organization is able to pay its current obligations;
• - is the profit received sufficient to service current activities;
• - what explains the discrepancies in the amount of profit received and the availability of funds.

Cash flow — a set of receipts and payments of funds distributed over time, created in the process of economic activity of the enterprise.

Cash inflow— cash receipts from proceeds from the sale of goods (products, works, services), an increase in the authorized capital through an additional issue of shares, received loans and borrowings, funds from the issue of corporate bonds, targeted financing and proceeds, etc.

Cash outflow — payments to cover current and investment costs, payments to the budget and extra-budgetary funds, payments of dividends, commissions to intermediaries, etc.

Net cash inflow (cash reserve) — the difference between all receipts and deductions (outflows) of funds.

Cash flow management is a targeted financial activity that includes:

Cash flow accounting,

Cash flow analysis,

Drawing up a cash flow budget,

Monitoring the execution of the cash flow budget,

Operational regulation of monetary settlements,

Sources of funds for the investment activities of an enterprise can be: receipts from current activities in the form of depreciation charges and net profit, income from the investment activities themselves, receipts from sources of long-term financing (issue of shares and corporate bonds, long-term loans and loans). Cash flows from investing activities generally result in temporary cash outflows.

In the course of financial activities, the following are provided: the receipt of funds as a result of obtaining short-term loans and borrowings or issuing short-term securities, as well as repaying debt on previously received short-term loans and borrowings and paying interest to lenders.

Cash flow analysis is carried out in order to identify the reasons for the deficit (excess) of funds and determine the sources of their receipt and areas of expenditure when managing the current liquidity and solvency of the enterprise. Such an analysis makes it possible to realistically assess the financial and economic condition of the company. Analysis of cash for the reporting period allows you to determine where the enterprise generates cash and where it spends it.

In practice, two key methods of calculating and analyzing cash flows are used - direct and indirect. When conducting analysis, these methods complement each other and give a real idea of ​​the cash flow in the enterprise for the billing period.

Direct method directly uses data from current accounting of cash flows in the accounts of the enterprise as a whole. The initial element is the total revenue from sales (products, works and services).

This method allows you to:

Show the main sources of inflow and direction of outflow of funds;

Promptly draw conclusions regarding the adequacy of funds to pay current obligations;

Establish the relationship between the volume of product sales and cash revenue for the reporting period; identify items that generate the largest inflows and outflows of funds;

Use the information obtained to forecast cash flows;

Control all receipts and directions of expenditure of funds, since cash flow is directly related to accounting registers (general ledger, order journals and other documents);

Assess by analyzing trends the liquidity and solvency of the enterprise.

However, the method does not reveal the relationship between cash flow and the resulting financial result (profit).

The direct method is called “upper”, since when it is used, the profit and loss statement is analyzed from top to bottom. An example of using the direct method is given in the following tables:

Cash flow by type of activity, thousand rubles.

Vertical analysis of hotel cash receipts and expenditures

These tables differ in that in the first the analysis of funds is carried out by type of activity (current, investment, financial), and in the second the structure of the inflow and outflow of funds for the enterprise as a whole is examined. From table one it follows that during the reporting period, the hotel’s cash balance increased by 9940 thousand rubles, or 4.4 times, thanks to the influx of cash from current activities in the amount of 22430 thousand, or 21.1%. However, there was an outflow of funds from investment and financial activities: 11,590 thousand (345%) and 900 thousand rubles. (500%).

From table two it follows that the main sources of cash flow for the hotel were revenue from the sale of goods (92.9%); advances received from customers (2.1%); loans received (3.5%); other income (1.5%). Among the areas of spending money, the main share is: payment of bills from suppliers for goods and services (42%); remuneration of personnel and contributions to extra-budgetary funds (25.3%); financing the acquisition of the active part of fixed assets (6.8%); payment of dividends and interest on securities (5.6%); settlements with the budget (7.2%); other expenses (4.1%). The net change in funds (the excess of inflows over outflows) is 9%. Consequently, the enterprise as a whole is able to generate funds in an amount sufficient to meet the necessary expenses.

Indirect method is based on the analysis of consolidated reporting data on cash flows by type of activity. Its initial element is net profit by type of activity. Cash flow is calculated based on the net profit indicator with its corresponding adjustments for positions reflecting its increase or decrease.

The advantages of the method are as follows:

Shows where the money is invested, and thus allows you to determine the relationship between the profit received and cash flow;

When used in the operational management of cash flows, it makes it possible to control the relationship between the financial result and one’s own working capital;

Allows you to identify the most problematic areas in the activities of the enterprise (accumulations of immobilized funds) and develop ways out of the critical situation.

Analysis of the results of calculating cash flow using the indirect method allows us to answer the following questions:

In what volume and from what sources funds were received and in what main directions they are spent;

Is the enterprise, as a result of current activities, able to ensure an excess of receipts over payments (cash reserve);

Is the enterprise able to pay off short-term obligations using proceeds from debtors;

Is the net profit received by the enterprise sufficient to satisfy its current needs for funds;

Are there enough own funds (net profit and depreciation charges) to carry out investment activities?

Cash flow statement (report form No. 4), compiled on the basis of the direct method, is the main document for analyzing cash flows.

Using this document you can install:

Level of financing of current and investment activities from own sources;

Dependence of the enterprise on external borrowings;

Dividend policy in the reporting period and forecast for the future;

Financial elasticity of the enterprise, i.e. its ability to create cash reserves (net cash inflow);

The real state of solvency of the enterprise for the past period (quarter) and the forecast for the next short-term period.

The cash flow management system will be effective, if management of accounts receivable, cash flow and accounts payable is provided as independent objects.

Such a control system assumes:

Synchronization of cash flows (inflow and outflow of money), i.e. the maximum possible convergence in time of receipt of receivables and repayment of accounts payable with an unconditional advance of the first. This allows you to reduce the balance of funds in the current account, reduce the volume of borrowings from creditors and debt servicing costs;

Payment control;

Sale of accounts receivable (factoring);

Discounts for the buyer for early payment;

Forecasting, monitoring and maintaining an acceptable level of accounts receivable in accordance with the policy adopted by the enterprise;

Focus on a large number of buyers (their diversification), which reduces the risk of non-payment of goods by one of the buyers;

Effective pricing and credit policy.

Signs of poor cash flow management include::

Delays in payment of staff;

Growth of accounts payable to suppliers and the state budget;

Increase in the share of overdue debt on bank loans;

Decrease in asset liquidity;

An increase in the duration of the production cycle due to interruptions in the supply of supplier services, material and energy resources.

Purpose of cash flow regulation— avoid cash shortages and ensure the current solvency of the enterprise.

The main possible causes of cash shortages can be divided into two types:

Internal:

1) a drop in sales volume due to the loss of one or more major customers and shortcomings in product range management;

2) deficiencies in financial management due to:

Weak financial planning;

Lack of financial service;

Lack of management accounting;

Insufficient cost control;

Low qualification of management personnel.

External:

Late repayment of accounts receivable;

Strong competition in certain market segments;

Constant increase in prices for energy resources and transport services;

High cost of borrowed funds (bank loans).

If there is a threat of a cash shortage, first of all, you should strive to improve the management of receivables and payables.

Accounts receivable management is aimed at accelerating turnover and reducing the growth rate of accounts receivable due to:

Strengthening control over the status of settlements with customers for late or deferred payments;

Analysis of debts for individual debtors in order to identify persistent defaulters;

Reviewing the ratio of sales on credit and prepayment based on the credit history of the travel agency;

Reducing accounts receivable by the amount of bad debts;

Targeting the largest possible number of buyers to reduce the risk of non-payment of goods by one or a number of large buyers;

Strengthening control over the ratio of receivables and payables and balancing the trends in their changes;

Providing discounts to customers for early payment of goods (services);

Sales of receivables to banks (factoring).

The choice of method for optimizing a deficit cash flow is determined by the nature of this deficit:

Short-term deficit - use of the system of “acceleration-slowdown of payment turnover”;

Long-term (chronic) deficit - attracting external financing.

IN short term acceleration of raising funds can be achieved by stimulating buyers, as a result of the introduction of discounts for payment of services upon delivery, the use of factoring, and slowing down payments by increasing, in agreement with suppliers, the terms for providing a commodity (commercial) loan to an enterprise, using leasing , transferring short-term loans to long-term ones.

At long-term deficit additional sources of financing are needed: new strategic investors, conducting an additional issue of shares, attracting long-term financial loans, placing long-term bond issues, selling financial investment instruments, selling (or leasing) unused fixed assets.

Reducing the volume of negative cash flow in the long term can be achieved by: reducing the volume and composition of real investment programs, refusing financial investment, reducing the amount of fixed costs of the enterprise.

Regulatory methods excess cash flow enterprises are associated with ensuring the growth of its investment activity.

To improve the management of an enterprise's solvency, it is advisable to develop a payment calendar that reflects the inflows and outflows of funds by amount and timing.

Table. Payment schedule

Using the payment calendar, you can assess in advance the shortage or excess of funds and take steps to adjust upcoming payments and payments in agreement with suppliers.

It can be presented in the form of cash flow, which characterizes the income and expenses generated by this activity. Making decisions related to capital investments is an important stage in the activities of any enterprise. To effectively use raised funds and obtain maximum return on invested capital, a thorough analysis of future cash flows associated with the sale is required developed operations, plans and projects.

Cash flow assessment carried out using discount methods taking into account the concept of the time value of money.

The task of the financial manager is to select such projects and ways of their implementation that will provide a cash flow that has the maximum present value compared to the amount of required capital investment.

Investment project analysis

There are several methods for assessing the attractiveness of investment projects and, accordingly, several main indicators of the effectiveness of cash flows generated by projects. Each method is based on the same principle: As a result of the implementation of the project, the company should make a profit(the equity capital of the enterprise must increase), while various financial indicators characterize the project from different sides and may meet the interests of various groups of persons related to this enterprise (owners, creditors, investors, managers).

The first stage analysis of the effectiveness of any investment project - calculation of the required capital investments and forecast of the future cash flow generated by this project.

The basis for calculating all performance indicators of investment projects is the calculation net cash flow, which is defined as the difference between current income (inflow) and expenses (outflow) associated with the implementation of an investment project and measured by the number of monetary units per unit of time (monetary unit / unit of time).

In most cases, capital investment occurs at the beginning of the project at stage zero or during the first few periods, followed by an influx of cash.

From a financial point of view, the flows of current income and expenses, as well as net cash flow, fully characterize the investment project.

Cash flow forecasting

When forecasting cash flow, it is advisable to forecast data for the first year broken down by month, for the second year - by quarter, and for all subsequent years - by total annual values. This scheme is recommended and in practice should correspond to the conditions of a particular production.

A cash flow for which all negative elements precede positive ones is called standard(classic, normal, etc.). For non-standard flow, alternating positive and negative elements is possible. In practice, such situations most often occur when completing a project requires significant costs (for example, dismantling equipment). Additional investments may also be required during the implementation of the project related to environmental protection measures.

• cash flows closely correspond to the time value of money theory, a basic concept in financial management;
• cash flows are a precisely determinable event;
• Using real cash flows avoids the problems associated with memorial accounting.

When calculating cash flows, you should take into account all those cash flows that change due to this decision:

• costs associated with production (building, equipment and equipment);
• changes in receipts, income and payments;
• taxes;
• changes in the amount of working capital;
• the opportunity cost of using scarce resources that are available to the firm (although this need not directly correspond directly to cash expenditures).

Should not be taken into account those cash flows that do not change in connection with the adoption of this investment decision:

• past cash flows (costs incurred);
• cash flows in the form of costs that would be incurred regardless of whether the investment project is implemented or not.

There are two types of costs that make up the total required capital investment.

1. Direct costs necessary to launch the project (construction of buildings, purchase and installation of equipment, investment in working capital, etc.).
2. Opportunity costs. Most often, this is the cost of used premises or land plots, which could have generated profit in another operation (alternative income) if they had not been occupied for sale.
   project.

When forecasting future cash flow, one must keep in mind that the recovery of costs associated with the necessary increase in the enterprise's working capital (cash, inventory, or accounts receivable) occurs at the end of the project and increases the positive cash flow attributable to the last period.

The final result of each period, which forms the future cash flow, is the amount of net profit increased by the amount of accrued depreciation and accrued interest on borrowed funds (interest has already been taken into account when calculating the cost of capital and should not be counted twice).

In general, the cash flow generated by an investment project is a sequence of elements INV t, CF k

• INV t - negative values ​​corresponding to cash outflows (for a given period, the total costs of the project exceed the total income);
• CF k are positive values ​​corresponding to cash inflows (income exceeds expenses).

Since planning for future cash flow is always carried out under conditions of uncertainty (it is necessary to predict future prices for raw materials, interest rates, wages, sales volume, etc.), it is advisable to consider at least three possible implementation options to take into account the risk factor - pessimistic, optimistic and most realistic. The smaller the difference in the resulting financial indicators for each option, the more resistant the project is to changes in external conditions, the lower the risk associated with the project.

Key indicators related to cash flow assessment

An important step in assessing cash flows is analysis of the financial capabilities of the enterprise, the result of which should be the value of the enterprise’s capital value at different volumes required.

WACC value is the basis for making financial and investment decisions, since in order to increase the capital of an enterprise, the following conditions must be met: the cost of capital is less than the return on its investment.

The weighted average cost of capital WACC is in most cases chosen as the discount rate when estimating future cash flows. If necessary, it can be adjusted to indicators of possible risk associated with the implementation of a specific project and the expected level of inflation.

If the calculation of the WACC indicator is associated with difficulties that raise doubts about the reliability of the result obtained (for example, when estimating equity capital), you can choose the average market return adjusted for the risk of the analyzed project as the discount rate.

In some cases, the value of the discount rate is taken equal to that of the Central Bank.

Payback period of the investment project

Calculating the payback period of an investment is often the first step in the process of deciding on the attractiveness of a particular investment project for an enterprise. This method can also be used to quickly reject projects that are unacceptable from a liquidity point of view.

The company's creditors are most interested in calculating this indicator, for whom the fastest payback is one of the guarantees of return of the funds provided.

In the general case, the desired value is the value!!DPP??, for which!!DPP = min N??, at which ∑ INV t / (1 + d) t more or equal ∑ CF k / (1 + d) k, where is the discount rate.

The decision criterion when using the payback period calculation method can be formulated in two ways:

• the project is accepted if the payback as a whole takes place;
• the project is accepted if the found DPP value is within the specified limits. This option is always used when analyzing projects that have a high degree of risk.

When choosing projects from several possible options projects with a shorter payback period will be preferable.

Obviously, the higher the discount rate, the higher the payback period.

A significant disadvantage of this indicator as a criterion for the attractiveness of a project is ignoring positive cash flow values beyond the calculated period . As a result, a project that would generally bring more to the enterprise over the entire period of implementation may turn out to be less attractive according to the criterion!!DPP?? compared to another project that brings in a much smaller bottom line profit but recovers the initial costs more quickly. (By the way, this circumstance does not concern the creditors of the enterprise at all.)

This method also does not distinguish between projects with the same value!!DPP??, but with different distribution of income within the calculated period. Thus, the principle of the time value of money when choosing the most preferable project is partially ignored.

Net present value (discounted) income

NPV indicator reflects a direct increase in the company’s capital, therefore it is the most significant for the company’s shareholders. Net present value is calculated using the following formula:

NPV = ∑ CF k / (1 + d) k — ∑ INV t / (1 + d) t.

The criterion for project acceptance is a positive valueNPV. In cases where it is necessary to make a choice from several possible projects, preference should be given to the project with a larger net present value.

It is necessary to take into account that the ratio of NPV indicators of various projects is not invariant with respect to changes in the discount rate. A project that was more preferable according to the NPV criterion at one rate value may turn out to be less preferable at another value. It also follows from this that the PP and NPV indicators may give conflicting assessments when choosing the most preferable investment project.

To make informed decisions and take into account possible changes in the rate (usually corresponding to the cost of invested capital), it is useful to analyze the graph of NPV versus d. For standard cash flows, the NPV curve is monotonically decreasing, tending with increasing d to a negative value equal to the reduced value of the invested funds (∑ INV t / (1 + d) t). The slope of the tangent at a given point on the curve reflects the sensitivity of the NPV indicator to changes in d. The greater the angle of inclination, the riskier the project: a slight change in the market situation that affects the discount rate can lead to serious changes in the predicted results.

For projects in which large incomes occur in the initial periods of implementation, possible changes in net present value will be smaller (obviously, such projects are less risky, since the return on invested funds occurs faster).

When comparing two alternative projects, it is advisable to determine the value barrier the rate at which the net present value of two projects is equal. The difference between the discount rate used and the barrier rate will represent the margin of safety in terms of the advantage of the project with a large NPV value. If this difference is small, then an error in choosing the rate d may lead to the fact that a project will be accepted for implementation, which in reality is less profitable for the enterprise.

Internal rate of return

The internal rate of return corresponds to the discount rate at which the present value of the future cash flow coincides with the amount of invested funds, i.e. it satisfies the equality

∑ CF k / (1 + IRR) k = ∑ INV t / (1 + IRR) t.

Finding this indicator without the help of special tools (financial calculators, computer programs) in the general case involves solving an equation of degree n, and therefore is quite difficult.

To find the IRR corresponding to normal cash flow, you can use a graphical method, given that the NPV value becomes 0 if the discount rate coincides with the IRR value (this is easy to see by comparing the formulas for calculating NPV and IRR). The so-called graphical method for determining IRR is based on this fact, which corresponds to the following approximate calculation formula:

IRR = d 1 + NPV 1 (d 2 - d 1) / (NPV 1 - NPV 2),

where d 1 and d 2 are rates corresponding to some positive (NPV 1) and negative (NPV 2) values ​​of net present value. The smaller the interval d 1 - d 2, the more accurate the result obtained. In practical calculations, a difference of 5 percentage points can be considered sufficient to obtain a fairly accurate value of the IRR value.

The criterion for accepting an investment project is that the IRR exceeds the selected discount rate. When comparing several projects, projects with larger IRR values ​​will be more preferable.

In the case of a normal (standard) cash flow, the condition IRR > d is satisfied simultaneously with the condition NPV > 0. Making a decision using the NPV and IRR criteria gives the same results if the possibility of implementing a single project is being considered. If several different projects are being compared, these criteria may produce conflicting results. It is believed that in this case the net present value indicator will have priority, since, reflecting an increase in the enterprise's equity capital, it is more in line with the interests of shareholders.

Modified internal rate of return

For non-standard cash flows, solving the equation corresponding to the definition of the internal rate of return, in the vast majority of cases (non-standard flows with a single IRR value are possible) gives several positive roots, i.e., several possible values ​​of the IRR indicator. In this case, the IRR > d criterion does not work: the IRR value may exceed the discount rate used, and the project under consideration turns out to be unprofitable.

To solve this problem in the case of non-standard cash flows, an analogue of IRR is calculated - the modified internal rate of return MIRR (it can also be calculated for projects generating standard cash flows).

MIRR is an interest rate at which, when accrued during the project implementation period n, the total amount of all investments discounted at the initial moment obtains a value equal to the sum of all cash inflows accrued at the same rate d at the end of the project implementation:

(1 + MIRR) n ∑ INV / (1 + d) t = ∑ CF k (1 + d) n - k .

Decision criterion MIRR > d. The result is always consistent with the NPV criterion and can be used to evaluate both standard and non-standard cash flows.

Profitability rate and profitability index

Profitability is an important indicator of investment efficiency, since it reflects the ratio of costs and income, showing the amount of income received for each unit (ruble, dollar, etc.) of invested funds.

P = NPV / INV · 100%.

Profitability index (profitability ratio) PI - the ratio of the present value of the project to the costs, shows how many times the invested capital will increase during the implementation of the project:

PI = [∑ CF k / (1 + d) k ] / INV = P / 100% + 1.

The criterion for making a positive decision when using profitability indicators is the ratio P > 0 or, which is the same, PI > 1. Of several projects, those with higher profitability indicators are preferable.

The profitability criterion may produce results that contradict the net present value criterion if projects with different amounts of invested capital are considered. When making a decision, you need to take into account the financial and investment capabilities of the enterprise, as well as the consideration that the NPV indicator is more in line with the interests of shareholders in terms of increasing their capital.

In this case, it is necessary to take into account the influence of the projects under consideration on each other, if some of them can be accepted for implementation at the same time and on projects already being implemented by the enterprise. For example, the opening of a new production facility may result in a reduction in sales of previously produced products. Two projects implemented simultaneously can produce both greater (synergy effect) and less results than in the case of separate implementation.

Summarizing the analysis of the main indicators of cash flow efficiency, the following important points can be highlighted.

Advantages of the PP method (a simple method for calculating the payback period):

• simplicity of calculations;
• accounting for project liquidity.

By cutting off the most dubious and risky projects in which the main cash flows occur at the end of the period, the PP method is used as a simple method for assessing investment risk.

It is convenient for small companies with insignificant cash turnover, as well as for express analysis of projects in conditions of lack of resources.

Disadvantages of the PP method:

• the choice of the barrier value of the payback period may be subjective;
• The profitability of the project beyond the payback period is not taken into account. The method cannot be used when comparing options with the same payback periods, but different lifespans;
• the time value of money is not taken into account;
• not suitable for evaluating projects related to fundamentally new products;
• the accuracy of calculations using this method largely depends on the frequency of dividing the project life into planning intervals.

Advantages of the DPP method:

• takes into account the time aspect of the value of money, gives a longer payback period for investments than PP, and takes into account more cash flows from capital investments;
• has a clear criterion for project eligibility. When using DPP, a project is accepted if it pays for itself over its life;
• the liquidity of the project is taken into account.

The method is best used for quickly rejecting low-liquidity and high-risk projects in
high level of inflation.

Disadvantages of the DPP method:

• does not take into account all cash flows coming after the completion of the project. But, since DPP is always greater than PP, DPP excludes a smaller amount of these cash receipts.

Advantages of the NPV method:

• is focused on increasing the wealth of investors, therefore is fully consistent with the main goal of financial management;
• takes into account the time value of money.

Disadvantages of the NPV method:

• It is difficult to objectively estimate the required rate of return. Its choice is a decisive point in NPV analysis, since it determines the relative value of cash flows at different time periods. The rate used in estimating NPV should reflect the required risk-adjusted rate of return;
• it is difficult to assess such uncertain parameters as moral and physical depreciation of fixed capital; changes in the organization's activities. This may lead to incorrect estimates of the service life of fixed assets;
• the NPV value does not adequately reflect the result when comparing projects:
  • with different initial costs and the same value
    pure real ones;
  • with a higher net present value and a long payback period and projects with a lower net present value and a short payback period;
• may produce inconsistent results with other cash flow measures.

The method is most often used when approving or rejecting a single investment project. It is also used when analyzing projects with uneven cash flows to assess the value of the project’s internal rate of return.

Advantages of the IRR method:

• objectivity, information content, independence from the absolute size of investments;
• gives an assessment of the relative profitability of the project;
• can easily be adapted to compare projects with different levels of risk: projects with a high level of risk should have a higher internal rate of return;
• does not depend on the chosen discount rate.

Disadvantages of the IRR method:

• complexity of calculations;
• possible subjectivity in the choice of standard yield;
• greater dependence on the accuracy of estimates of future cash flows;
• implies mandatory reinvestment of all income received, at a rate equal to IRR, for the period until the end of the project;
• not applicable for estimating non-standard cash flows.

The most commonly used method, due to the clarity of the results obtained and the possibility of comparing them with the yield of various market financial instruments, is often used in combination with the payback period method

Advantages of the MIRR method:

• gives a more objective assessment of the return on investment;
• less likely to conflict with the NPV criterion;

Disadvantages of the MIRR method:

• depends on the discount rate.

MethodMIRRused in the same cases as the methodIRRin the presence of uneven (non-standard) cash flows causing a multiplicity problemIRR.

Advantages of the methodPAndP.I.:

• the only one of all indicators reflects the ratio of income and costs;
• gives an objective assessment of the profitability of the project;
• applicable to assess any cash flows.

Disadvantages of the methodPAndP.I.:

• may give conflicting results with other indicators.

The method is used when the payback method and the methodNPV (IRR) give contradictory results, and also if the size of the initial investment is important for investors.

Analysis of criteria for the effectiveness of investment projects. Comparison of NPV and IRR.

1. If the NPV and IRR criteria are applied to a single project in which only cash inflows occur after the initial cash outlay, then the results obtained by both methods will
   are consistent with each other and lead to identical decisions.
2. For projects with other cash flow schedules, the value of the internal rate of return IRR may be as follows:

• no IRR:
  • a project in which there is no cash expenditure always has a positive NPV value; therefore, the project has no IRR (where NPV = 0). In this case, you should abandon IRR and use NPV. Since NPV > 0, this project should be accepted;
  • A project that has no cash flows always has a negative NPV and has no IRR. In this case, you should abandon IRR and use NPV; since NPV< 0, то данный проект следует отвергнуть;
• the opposite of IRR. A project that first receives cash and then spends it has an IRR that is never consistent with the NPV (a low IRR and a positive NPV will occur simultaneously);
• several IRRs. A project that alternates between receiving and then spending cash will have as many internal rates of return as there are changes in the direction of cash flows.

3. Ranking of projects is necessary if:

• projects are alternative to be able to choose one of them;
• the amount of capital is limited, and the company is not able to collect enough capital to implement all good projects;
• there is no agreement between NPV and IRR. If two methods are used simultaneously: NPV and IRR, different rankings often occur.

Reasons for the discrepancy between the results of the IRR and NPV methods for several projects

Project Time - Projects that take place over a long period of time may have a low internal rate of return, but over time their net present value may be higher than short-term projects with a high rate of return.

Choosing between IRR and NPV:

• If we use the NPV method as a criterion for selecting an investment project, then it leads to maximizing the amount of cash, which is equivalent to maximizing value. If this is the firm's goal, then the net present value method should be used;
• If the IRR method is used as a selection criterion, it leads to the maximization of the firm's growth percentage. When a company's goal is to increase its value, the most important characteristic of investment projects is the degree of return, the opportunity to earn cash for reinvestment.

Estimation of cash flows of different durations

In cases where there is doubt about the correctness of comparison using the considered indicators of projects with different implementation periods, you can resort to one of the following methods.

Chain repeat method

When using this method, the smallest common multiple of the implementation time and the estimated projects is found. They construct new cash flows resulting from several project implementations, assuming that costs and income will remain at the same level. Using this method in practice may involve complex calculations if several projects are being considered and each will need to be repeated several times to meet all deadlines.

Equivalent annuity method

This method involves simpler calculations carried out in the following stages for each of the projects under consideration:

Projects with greater significance are more preferable.

At the same time, re-implementation of the project is not always possible, especially if it is quite long or relates to areas where rapid technological updating of manufactured products occurs.

In addition to the considered quantitative indicators of investment efficiency, when making investment decisions, it is necessary to take into account the qualitative characteristics of the project’s attractiveness, corresponding to the following criteria:

• compliance of the project under consideration with the overall investment strategy of the enterprise, its long-term and current plans;
• possible impact on other projects implemented by the enterprise;
• the prospects of the project in comparison with the consequences of refusing to implement alternative projects;
• compliance of the project with accepted regulatory and planning indicators regarding the level of risk, financial stability, economic growth of the organization, etc.;
• ensuring the necessary diversification of the financial and economic activities of the organization;
• compliance of project implementation requirements with available production and human resources;
• social consequences of the project, possible impact on the reputation and image of the organization;
• compliance of the project under consideration with environmental standards and requirements.

The main disadvantage of the considered methods is the assumption that the conditions for the implementation of projects, and therefore both the required costs and the income received, will remain at the same level, which is almost impossible in the current market situation.

Purpose and objectives of cash flow management

Topic 8. Organizational cash flow management

The implementation of all types of financial and business transactions of an organization is accompanied by the movement of funds - their receipt or expenditure. This continuous process is defined by the concept cash flow.

Cash flow– a set of cash inflows and outflows distributed over time.

Management goal cash flows – ensuring the financial balance of the organization in the process of its development by balancing the volumes of receipt and expenditure of funds and synchronizing them over time.

Cash flow management tasks:

· formation of a sufficient amount of funds of the organization in accordance with the needs of its economic activities;

· optimization of the distribution of the volume of generated monetary resources of the organization in areas of economic activity;

· ensuring a high level of financial stability and solvency of the organization;

· maximizing the growth of net cash flow, ensuring the specified pace of development of the organization;

· minimizing losses in the value of funds in the process of their economic use.

The following types of cash flows are distinguished.

· By type of activity allocate cash flows from current (operating), financial and investment activities.

· In the direction of cash flow distinguish a positive cash flow, characterizing the entire set of cash receipts, and a negative cash flow, characterizing the totality of payments.

· By calculation method distinguish between gross cash flow, which represents the entire totality of cash receipts and expenditures, and net cash flow, which represents the difference between positive and negative cash flows.

· By degree of continuity distinguish regular ones, i.e. providing equal intervals between payments and irregular (discrete).

· According to the sufficiency of volume distinguish excess cash flow, which represents the excess of cash inflows over their outflow, and deficit cash flow, in which cash receipts are lower than the organization's needs for their expenditure.

An organization's cash flows in all forms and types, and, accordingly, the total cash flow are the most important independent object of financial management.

The system of main indicators characterizing cash flow includes:

· volume of cash receipts;

· amount of money spent;

· volume of net cash flow;

· the amount of cash balances at the beginning and end of the period under review;

· control amount of funds;

· distribution of the total volume of cash flows of certain types over individual intervals of the period under review. The number and duration of such intervals are determined by specific tasks of cash flow analysis or planning;

· assessment of internal and external factors influencing the formation of the organization's cash flows.

Cash flow is carried out in three types of activities:

· current (main, operational) activities;

· investment activities;

· financial activities.

Current (main, operational) activities– the activities of an organization pursuing profit-making as the main goal, or not having profit-making as such in accordance with the subject and goals of the activity, i.e. production of industrial, agricultural products, construction work, sale of goods, provision of public catering services, procurement of agricultural products, rental of property, etc.

Inflows from current activities:

· receipt of revenue from the sale of products (works, services);

· proceeds from the resale of goods received through barter exchange;

· proceeds from repayment of accounts receivable;

· advances received from buyers and customers.

Outflows from current activities:

· payment for purchased goods, works, services;

· issuing advances for the purchase of goods, works, services;

· payment of accounts payable for goods, works, services;

· salary;

· payment of dividends, interest;

· payment for taxes and fees.

Investment activities– activities of the organization related to the acquisition of land, buildings, other real estate, equipment, intangible assets and other non-current assets, as well as their sale; with the implementation of its own construction, expenses for research, development and technological development; with financial investments.

Inflows from investment activities:

· receipt of proceeds from the sale of non-current assets;

· receipt of proceeds from the sale of securities and other financial investments;

· proceeds from repayments of loans provided to other organizations;

· receiving dividends and interest.

Outflows from investment activities:

· payment for acquired non-current assets;

· payment for purchased financial investments;

· issuing advances for the purchase of non-current assets and financial investments;

· providing loans to other organizations;

· contributions to the authorized (share) capital of other organizations.

Financial activities– the activities of the organization, as a result of which the size and composition of the organization’s equity capital and borrowed funds change.

Inflows from financing activities:

· proceeds from the issue of equity securities;

· proceeds from loans and credits provided by other organizations.

Outflows from financing activities:

· repayment of loans and credits;

· repayment of finance lease obligations.

Cash flows created by the current activities of the organization often move into the sphere of investment activities, where they can be used for the development of production. However, they can also be directed to the sphere of financial activities to pay dividends to shareholders. Current activities are quite often supported by financial and investment activities, which ensures additional capital inflow and the survival of the organization in a crisis situation. In this case, the organization stops financing capital investments and suspends the payment of dividends to shareholders.

Cash flow from current activities is characterized by the following features:

· current activities are the main component of the entire economic activity of the organization, therefore the cash flow generated by it should occupy the largest share in the total cash flow of the organization;

· forms and methods of current activities depend on industry characteristics, therefore, in different organizations, cash flow cycles of current activities may vary significantly;

· operations that determine current activities are usually characterized by regularity, which makes the cash cycle quite clear;

· current activities are focused mainly on the commodity market, therefore its cash flow is related to the state of the commodity market and its individual segments. For example, a shortage of inventories on the market can increase the outflow of money, and overstocking of finished products can reduce their inflow;

· current activities, and therefore its cash flow, are inherent in operational risks that can disrupt the cash cycle.

Fixed assets are not included in the cash flow cycle of current activities, since they are a component of investment activities, but it is impossible to exclude them from the cash flow cycle. This is explained by the fact that current activities, as a rule, cannot exist without fixed assets and, in addition, part of the costs of investment activities is reimbursed through current activities by depreciation of fixed assets.

Thus, the current and investment activities of the organization are closely interconnected. The investing cash flow cycle is the period of time during which cash invested in non-current assets will return to the organization in the form of accumulated depreciation, interest, or proceeds from the sale of those assets.

The movement of cash flows from investment activities is characterized by the following features:

· the investment activity of the organization is subordinate in nature in relation to current activities, therefore the inflow and outflow of funds from investment activities should be determined by the pace of development of current activities;

· forms and methods of investment activity depend to a much lesser extent on the industry characteristics of the organization than on current activities, therefore, in different organizations, the cash flow cycles of investment activity are, as a rule, almost identical;

· the inflow of funds from investment activities is usually significantly distant from the outflow in time, i.e. the cycle is characterized by a long time lag;

· investment activity has various forms (acquisition, construction, long-term financial investments, etc.) and different directions of cash flow in certain periods of time (as a rule, outflow initially prevails, significantly exceeding inflow, and then vice versa), which makes it difficult to imagine the cycle of its cash flow flow in a fairly clear pattern;

· investment activity is associated with both commodity and financial markets, the fluctuations of which often do not coincide and can affect investment cash flow in different ways. For example, an increase in demand in the commodity market can give an organization an additional cash flow from the sale of fixed assets, but this, as a rule, will lead to a decrease in financial resources in the financial market, which is accompanied by an increase in their value (interest), which, in turn, can lead to an increase in the organization’s cash outflow;

· the cash flow of investment activities is influenced by specific types of risks inherent in investment activities, united by the concept of investment risks, which are more likely to occur than operational ones.

The cash flow cycle of a financial activity is the period of time during which cash invested in profitable assets will be returned to the organization with interest.

The movement of cash flows from financial activities is characterized by the following features:

· financial activities are subordinate in nature in relation to current and investment activities, therefore, the cash flow of financial activities should not be formed to the detriment of the current and investment activities of the organization;

· the volume of cash flow from financial activities should depend on the availability of temporarily free funds, so cash flow from financial activities may not exist for every organization and not permanently;

· financial activity is directly related to the financial market and depends on its condition. A developed and stable financial market can stimulate the financial activities of an organization, therefore, ensure an increase in the cash flow of these activities, and vice versa;

· financial activities are characterized by specific types of risks, defined as financial risks that are characterized by particular danger and therefore can significantly affect cash flow.

The organization's cash flows closely connect all three types of its activities. Money constantly “flows” from one type of activity to another. Cash flow from operating activities should generally fuel investing and financing activities. If there is a reverse direction of cash flows, then this indicates an unfavorable financial position of the organization.

Determination of cash flow, cash flow analysis

Information on determining cash flow, cash flow analysis

1. Definition

Definition

In the form of notations

Clarifications

2. Cash flow analysis

3. Cash flow management system

4. Main factors influencing cash flow

5. Briefly about the main thing

1. DefinitionCash flow

Cash flow or cash flow is a series of numbers abstracted from its economic content, consisting of a sequence of received or paid money distributed over time. Cash flow management is based on the concept of cash flow. For example, cash is converted into inventory, accounts receivable, and back into cash, closing the company's working capital cycle. When cash flow decreases or is completely blocked, the phenomenon of insolvency occurs. An enterprise may experience a lack of funds even if it formally remains profitable (for example, payment terms by the company’s clients are violated). This is precisely what causes the problems of profitable but illiquid companies on the verge of bankruptcy.

The generally accepted designation for payment flow is CF. The designation of the numerical series is CF0, CF1, ..., CFn. An individual member of such a series can have both positive and negative meanings.

In essence, cash flow is the difference between the income and costs of an economic entity (usually a company), expressed in the difference between payments received and payments made. In general, this is the sum of the firm's retained earnings and its depreciation charges (see Depreciation), saved to form its source of funds for future renewal of fixed capital. In other words, Cash Flow is the net amount of money actually received by a firm in a given period. In many translated works, this concept is expressed by the terms “cash flow” or “cash flow,” which is clearly unfortunate, since the words “Cash” in English and “cash” in Russian are very different in the range of concepts they cover. For example, cash flow includes depreciation charges or changes in entries in the company's bank accounts (for non-cash transactions): neither one nor the other have absolutely nothing to do with cash in the generally accepted sense.

2. Cash Flow Analysis

Cash flow analysis is essentially the determination of the timing and magnitude of cash inflows and outflows. The purpose of cash flow analysis is, first of all, to analyze the financial stability and profitability of the enterprise. Its starting point is the calculation of cash flows, primarily from operating (current) activities. Its starting point is the calculation of cash flows, primarily from current activities.

Cash flow characterizes the degree of self-financing of an enterprise, its financial strength, potential, and profitability.

The financial well-being of an enterprise largely depends on the influx of cash to cover its obligations. Lack of the minimum required cash reserves may indicate financial difficulties. Excess cash may be a sign that the business is losing money.

It is convenient to analyze cash flows using a cash flow statement. According to the international standard IAS7, this report is generated not by the sources and areas of use of funds, but by the areas of activity of the enterprise - current, investment and financial. It is the main source of information for cash flow analysis.

The components of the cash flow statement are the inflow and outflow of funds in the context of the current, investing and financial activities of the organization.

Current activities include the cash impact of business transactions that affect the organization's profit margin. This category includes such operations as the sale of goods (work, services), the purchase of goods (work, services) necessary in the production activities of the organization, the payment of interest on a loan, wage payments, and tax transfers.

Investment activities mean the acquisition and sale of fixed assets, securities, issuance of loans, etc.

Financial activities include receiving from the owners and returning funds to the owners for the company’s activities, transactions on repurchased shares, etc.

Preparation of a cash flow statement involves:

Determination of funds as a result of the current activities of the organization;

Determination of funds as a result of the organization’s investment activities;

Determination of funds resulting from the financial activities of the organization.

For this purpose, data from the balance sheet and income statement are used.

The profit and loss statement shows how profitable the organization's activities were in the analyzed period, but it cannot show the inflow and outflow of funds in the current, investing and financial activities of the company.

The income statement is prepared using the accrual method, when income/expenses are recognized in the period in which they arise, and not in the period of receipt/outflow of funds.

In order to identify cash flows, it is necessary to transform the income statement. In this case, adjustments are used, according to which income is recognized only in the amount of funds actually received, and expenses in the amount of actual payments.

There are two methods for transforming the income statement: direct and indirect.

With the direct Cash Flow method, each item in the income statement is transformed, in the process of which the actual cash inflow and actual expenditure are determined. The indirect method does not require the transformation of each item in the income statement. According to this method, the starting point for the calculation is the amount of annual profit (loss) for the analyzed reporting period, which is adjusted by adding all expenses not related to cash flows (for example, depreciation) and subtracting all income not related to cash flows.

Before drawing up a cash flow statement, first of all, it is necessary to find out which balance sheet item for at least two periods was the source of cash flow and which caused its expenditure. This is done using a table showing the sources of formation and consumption of enterprise funds. First, the change in each balance sheet item is calculated, after which this change is included in the sources or consumption of funds in accordance with the following rules:

The source of available cash is any increase in an item classified as either “Liabilities” or “Equity.” An example is a bank loan.

Any decrease in active accounts is also a source of cash flow. Examples: sale of non-current assets or reduction of inventories.

Consumption:

Consumption of funds represents any decrease in an account classified as either “Liabilities” or “Equity.” An example of consumption of available funds is loan repayment.

Any increase in active balance sheet items. The acquisition of non-current assets and the formation of inventories are examples of cash flow consumption.

The formation and consumption of cash flow occurs in any type of activity of the company. The table below shows which operations related to a particular field of activity (production, investment, financial) caused an inflow (+) and which caused an outflow (-) of the company’s funds.

The source of available cash is any increase in an item classified as either “Liabilities” or “Equity.” An example is a bank loan. Any decrease in active accounts is also a source of cash flow. Examples: sale of non-current assets or reduction of inventories.

3. Cash flow management system

When building a cash flow management system, it is important to optimize the relevant business processes, for which it is necessary to determine:

The composition of the central financial districts, according to which cash budgets are formed and controlled;

Participants in the process, that is, company employees acting as payment initiators, controllers of compliance with internal regulations, acceptors;

Responsibilities and powers of each participant in the business process, in particular in determining payment limits, and those responsible for making decisions on certain payments;

Time schedule for payments, in particular, establish the timing and sequence of applications for payment.

Planning and control;

In the future, this will reduce the labor costs of the company’s top managers (general and financial directors) to control the expenditure of funds. If previously they had to review and sign each payment request, now that the expense amounts are approved in the budgets and the procedure for approving payments is formalized, control over cash flows can be entrusted to the financial manager. Accordingly, the financial (general) director will only approve a limited number of payments, usually over-the-limit, large or irregular. For example, it is enough to agree on the amount of payment for office rent once when approving the budget, leaving control of the payment procedure itself and compliance of the amounts with the budget with the financial manager.

Properly structured business processes help solve another pressing problem - to minimize the risk of abuse by company employees by separating the functions of monitoring payments and their initiation. For example, the head of a business area accepts all requests for payment in his financial center and is responsible for implementing the budget, and a financial service employee (this could be a financial director, financial manager) monitors the compliance of requests with budget limits and the implementation of regulatory procedures of the payment system.

Effective cash flow management increases the degree of financial and operational flexibility of the company, as it leads to:

Improving operational management, especially in terms of balancing income and expenditure of funds;

Increasing sales volumes and optimizing costs due to greater opportunities to maneuver company resources;

Increasing the efficiency of managing debt obligations and the cost of servicing them, improving the terms of negotiations with creditors and suppliers;

Creating a reliable basis for assessing the performance of each of the company’s divisions and its financial condition as a whole;

Increasing the company's liquidity.

As a result, a high level of synchronization of cash receipts and expenditures in volume and time makes it possible to reduce the enterprise’s real need for current and insurance balances of cash assets serving the main activity, as well as a reserve of investment resources for real investment.

This balancing of cash inflows and outflows at the planning stage is carried out by developing a cash flow budget (CFB), the format of which depends on the business characteristics of a particular enterprise. The result of the calculations is the determination of net cash flow for the budget period, reflected in a separate line as “cash increase or decrease” depending on its value (positive or negative) and the cash balance at the end of the planning period. If the latter is negative or less than the minimum established standard, then, firstly, an analysis of cash inflows and outflows is carried out in order to identify additional reserves, and secondly, a credit plan is drawn up to attract external sources of financing.

The decision to attract a loan is made subject to greater economic feasibility of this method of external financing compared to other available methods of covering the cash gap (increase in advances from buyers, change in the terms of a commercial loan, increase in stable liabilities). Currently, banks offer various credit products: overdraft, term loans, lines of credit, bank guarantees, letters of credit, etc. To eliminate short-term cash gaps, the use of an overdraft is considered preferable, but with the constant use of borrowed capital, the choice of types of credit products should be based on taking into account the effect of financial and operating leverage.

4. Main Factors Affecting Cash Flow

All factors influencing the formation of cash flows can be divided into external and internal. External factors include: the situation in the commodity and financial markets, the taxation system for enterprises, the established practice of lending to suppliers and buyers of products (business rules), the system for carrying out settlement transactions of business entities, the availability of external sources of financing (credits, loans, targeted financing).

Among the internal factors, one should highlight the stage of the life cycle at which the enterprise is located, the duration of the operating and production cycles, the seasonality of production and sales of products, the depreciation policy of the enterprise, the urgency of investment programs, the personal qualities and professionalism of the management of the enterprise.

The construction of an enterprise cash flow management system is based on the following principles:

Information reliability and transparency;

Planning and control;

Solvency and liquidity;

Rationality and efficiency.

The basis of management is the availability of prompt and reliable accounting information generated on the basis of accounting and management accounting. The composition of such information is very diverse: the movement of funds in the accounts and cash register of the enterprise, accounts receivable and payable of the enterprise, budgets for tax payments, schedules for the issuance and repayment of loans, interest payments, budgets for upcoming purchases that require advance payment, and much more. The information itself comes from various sources; its collection and systematization must be arranged with special care, since delays and errors in the provision of information can lead to serious consequences for the entire company as a whole. At the same time, each enterprise independently determines the format of provision, frequency of information collection, and document flow scheme.

But the main role in managing cash flows is to ensure their balance in terms of types, volumes, time intervals and other significant characteristics. To successfully solve this problem, it is necessary to implement planning, accounting, analysis and control systems at the enterprise. After all, planning the economic activities of an enterprise in general and cash flows in particular significantly increases the efficiency of cash flow management, which leads to:

Reducing the current needs of the enterprise for them based on increasing the turnover of cash assets and receivables, as well as choosing a rational structure of cash flows;

Effective use of temporarily free funds (including insurance balances) through financial investments of the enterprise.

ensuring a cash surplus and the required solvency of the enterprise in the current period by synchronizing positive and negative cash flow in the context of each time interval.

Thus, cash flow management is the most important element of the financial policy of an enterprise; it permeates the entire management system of the enterprise. The importance and significance of cash flow management in an enterprise can hardly be overestimated, since not only the sustainability of the enterprise in a specific period of time, but also the ability to further develop and achieve financial success in the long term depends on its quality and efficiency.

5. Briefly about the main thing

Cash flows reflect the income and expenses of economic entities. By analyzing cash flows, you can find out the degree of financial stability, self-financing of an enterprise, its financial strength, financial potential, and profitability. Cash flow management is the most important part of an enterprise's financial policy, which permeates the entire enterprise management system.

Sources

ru.wikipedia.org -Wikipedia-The Free Encyclopedia

slovari.yandex.ru - Yandex.Dictionaries

www.wikiznanie.ru – free encyclopedia

www.financial-lawyer.ru - Information Agency “Financial Lawyer”

www.cfin.ru - Website "Corporate Management"

www.bizuchet.ru - Project "BizUchet"

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