Pure cash flow is one of the main business performance indicators, designed to answer the question of the leadership "And where is the money?". Read what the indicator is from which components it is formed and how to calculate it. And also see an example of calculating the net cash flow.
What is this article:
What is a pure cash flow
Pure cash flow (CDP) is the result of the summation of all the tributaries money and cash outflows (with a minus) on the project in the context of time intervals, usually months or years. The indicator is used to calculate economic efficiency investment projectas well as for creating a report on the cash flow of the company Over the past period.
The influx and outflow of capital is the receipt and return of loans and loans, the payment of dividends to shareholders - not used in the calculation of the CDP on an investment project, because otherwise the picture investment attractiveness The project will be distorted.
Clean cash flow formula
Before talking to how to find a clean cash flow, consider what it consists of. CDP includes:
- Cash flow from operating activities (OCF).
- Cash flow from financial activities (FCF).
- Cash flow from investment activity (ICF).
Therefore, pure cash flow is determined by the formula:
where the i-temporal interval is usually a month or year
The division of cash flow to the operational, financial and investment carries an important semantic load. Having received total result In the form of cash flow, you find it difficult to answer which of the areas of the company's activities have a positive (or negative) effect on changing funds.
Is the operating activity loss? Or is it high lover gives a negative effect in the form large sums Percentage payments? Or in the reporting period, the company invested in a new project, purchased new equipment? Sharing a cash flow into the components, you will clearly see all trends in your business and make the right conclusions.
Imagine clear cash flows belonging to each component.
Picture. Pure cash flow
Depending on the specific situation, the same cash flows may relate to different types Activities. For example, interest on the loan can be both financial activities if the loan is taken to finance the current business and the investment, if the loan is spent only for a new business direction. Leasing payments can also be both operating cash flow and financial, and investment.
Users of information about pure cash flow
The company provides information on the net cash flow in the cash flow statement (ODDS, in foreign practice Cash Flow Statement). It refers to the regulated reports, because the importance of it is hard to overestimate. In the cash flow report, all information about changes in the company's money for reporting period.
For the company's manual, a net cash flow is company Liquidity Management Tool . That is, focusing on the data of the cash flow report, managers can evaluate whether the company can repay payables, whether there will be funds to invest in new projects or vice versa, it is necessary to look for ways to external financing activities.
The cash flow report serves creditors and investors the basis for the adoption of investment decisions, shows how successful the company can manage money whether it will pay dividends and so on.
Methods for calculating pure cash flow
In order to calculate a net cash flow and fill out a cash flow report, you can use a direct or indirect method. The choice of the method of calculation suitable for you depends on the current accounting in your company, from the completeness of the source data on income and expenses and on your goals, of course.
Direct method
The method is based on direct use of data accounting accounts of the company. To use, it is necessary to conduct preparatory activities, that is, a system of accounting analyst is necessary to configure the accounting analyst in the accounts.
- Fill out the reference book of activities. Make operational activities, financial activities, investment activities.
- Fill out a certificate of certificate of money, making everything you need for accounting.
- Assign the type of activity, the certificate of cash compensation or cash flow rate.
As a result, at the end of the reporting period, you will get a net cash flow, designed in the form of a cash flow report on a direct method.
It will look like, as shown in Table 1.
Table 1. ODD example (fragment)
The advantages of this method are considered:
- the ability to show sources of cash and cash flow, conduct analytics for counterparties, treaties, nomenclature, etc.;
- direct binding to the budget of cash flow and light plan-fact analysis;
- easy to build a payment calendar based on data.
Cons direct method also has, they are as follows:
- labor consumption. If a direct method of accounting for DDS is used in the company, then performers in the field need to fill out at least two additional analysts for each movement. With large volumes, this is a catastrophic amount of labor;
- based on ODD, formed by the Direct method, it is impossible to determine the relationship of the financial result and changes in the amount of funds.
Indirect method
The indirect method is considered simpler for calculating the net cash flow, although standards international Reporting Recommend to use direct method. In order to make calculation of the CDP indirectly method, you can have the deployed data on the accrual of income and expenses of the company during the reporting period.
It is necessary to act according to the algorithm:
- Take a statement of financial position and report on the Company's total income for the reporting period.
- Form the ODD structure, for example, in Excel, as shown in Table 2.
table 2
- Fill out a consistent report, subtracted (adding) from the amount of the net financial result of a non-monetary operational operation.
These operations include:
- depreciation of OS and NMA;
- income / loss against the disposal of OS and NMA;
- income / loss against OS and NMU reassessment;
- income tax costs;
- income / loss against currency revaluation;
- creating / write-off reserves;
- write off hopeless debts.
As a result, you will receive a net cash flow from operating activities.
- Next, enter the table positive and negative cash flows from financial activities, such as:
- obtaining loans;
- return of loans;
- financial lease obligations;
- contributions to share capital.
The result will be a pure cash flow from financial activities.
- Finally, enter all monetary operations Investment nature, such as:
- acquisition of fixed assets, NMA, financial non-current assets;
- sale of non-current assets;
- obtaining dividends;
- provided loans and interest on them.
Thus, you will form a CDP from investment activities.
- The last step will be the summation of cash flows and obtaining an indicator calculated by the indirect method.
The advantages of the use of an indirect method include:
- Fast and simple filling ODD.
- The ability to visually see sources of cash flow and identify reserves of its optimization.
Disadvantages of the indirect method:
- On its basis it is impossible to form a budget of cash flow.
- Nefinananist will be difficult to understand it and analyze.
When using both direct and indirect methods, it is necessary to make the change in money changes for the period. Check what is equal to a clean cash flow, whether equality is performed
CDP \u003d DS Kon.P - DS Nach.P
If so, you filled out ODDs correctly.
Example of calculating pure cash flow
Pure cash flow uses not only for the cash flow report over the past period. It is a key investment planning parameter. All investment indexes and parameters are calculated on the basis of this indicator. Consider on the example how to form a CDP of the investment project and avoid common errors.
Market wholesale trade Digital mobile technology, considers the investment project of opening a network of retail sales points in Moscow and St. Petersburg. The project has a useful and regulatory period - 3 years (hereinafter company's strategy can be changed).
At the first stage, it is planned to purchase equipment (racks, slave lighting, commercial equipment, etc.) for $ 20,000, installation and commissioning of this equipment will be $ 3,000 and another $ 900 is required in a year. The total revenue of the company at the end of the first year of the project is expected to be $ 120,000, from which the project must bring $ 40,000. Following the first year, dividends payments to shareholders in the amount of $ 6,000. Expected operational cash flows expressed in the initial prices of the initial year Investments can be estimated from Table 3 below (the liquidation cost of the equipment is not taken into account).
Table 3.. Expected operational cash flow projects
The initial investment company sells by 40% borrowed capital Under 14%, the loan should be repayed for 3 years (the method of repayment of borrowed capital is annuity). Previously, the company suffered the cost of marketing market research in the amount of $ 5,000.
We form a net cash flow on the project. To do this, I will initially understand what payments we will include in the calculation, and which is not.
Costs for the purchase of equipment, its installation and commissioning include in the CDP. These are investment cash flows. Wherein initial costs It is necessary to reduce the share of financing from external sources in the amount of 40%.
The initial costs will be equal: (20 000 + 3,000) * 0,6 \u003d $ 13 800
Project revenue, variable costs and constant costs are also included in the CHDP. These are operating cash flows. Depreciation should be allocated from constant costs and exclude from the CDP. Depreciation is a non-monetary operation.
But the depreciation must be taken into account when calculating the forecast income tax, which should be included in the operating cash flow.
Getting and refunding a loan should not be taken into account in a pure money flow, as it is an influx and outflow of capital, and interest for the use of the loan - follows. They will relate to financial cash flow.
The costs of marketing research, like all other previous costs incurred (non-returnable - Sunk Costs), consider in the CHDP on the project should not be. Criterion - Although these streams are related to the expected flows on the project, but they cannot be monetized.
Dividends to pay and other general cash flows (such as credit, bond issuing, acquisition financial assets) Not taken into account in the CDP, as this contradicts the rules of "relevance".
IN last year The project's actions should be included in the terminal value of fixed assets, because you will have the opportunity to implement fixed assets on the free market if the need for use will disappear.
The terminal value of fixed assets is considered by the formula:
Sile - σam \u003d 20 000 + 900 - (7 400 + 8 500 + 3,000) \u003d $ 2 000
The final CDP on the investment project is formed in Table 4.
Table 4.. Final ChDP on the project
|
Amount, US dollars |
|||||
|
Investment flows |
Fixed assets + installation |
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|
Operating flow |
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|
Variable costs |
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|
Constant costs minus depreciation |
|||||
|
Financial flows |
Interest on credit |
||||
|
(13 800) |
In conclusion, we note that the control of a net cash flow is the second most importantly after controlling the cost-effectiveness for the financier. Observe in the mechanisms for the formation of the CDP in your company and get an effective tool for influencing monetary mass In appeal, and at the same time find the answer to such an important question of the leader "Where is the money?".
Economic science under investment cash flow understands the actual current revenues that are directly related to the implementation of the project under consideration. This money should be distinguished from other payments to the investor from other areas of its activities.
Thus, we can consider an investment flow as financial revenues from the implementation of the investment project per unit of time.
Let's consider it all on specific example. Investor acquired a package of shares oil company. All securities bring annual income. That is, in the situation under consideration, the amount of cash flow, which will receive an investor will be equal to the amount of dividends.
First of all, it is necessary to understand that cash flows arise not only within the framework of investment processes, but also in the financial sphere and operating activities.
A cash flow that is directed to the investor is also called influx. On the contrary, the money that move in the opposite direction is called outflow.
At the initial and early stage of the life cycle of the investment project, cash flows in 100% of cases will be outflow. No need to surprise this. It looks quite natural, if you remember that on the pre-investment and investment phase (stage) of the implementation of the investment project, there is always the main part of the expenses of the investor.
When an investment project enters the operational phase, the cash outflow is gradually replaced by the influx. And with the time of time, this difference is becoming more impressive. It is here that the investor begins to earn and receive substantial income on investment capital.
Financial flow is a movement of money as a result of implementation financial operations. It may be receiving and repaying bank loans, paying dividends to shareholders, contributions to authorized capital Companies, payment of interest and so on.
As part of each project, investment is made to share the investment and operational flow. In addition, non-trading, discounted and net cash flows are considered separately. Moreover, an investor may consider separately and other receipts and cash retirement.
The ratio of income and disposal of money is customary to designate EBIDTA (Earnings Before Interest, Taxes, Depreciation and AMORTIZATION). In fact, this indicator indicates the income of the investor until the deduction of mandatory current spending or costs. In turn, they include:
- depreciation;
- taxes and fees;
- payment of interest on bank loans.
This indicator within the investment project is the key to the definition of EBITDA MARGIN, which shows the return of investments. It is customary to count in the form of an index, which is expressed as a percentage. EBITDA MARGIN is calculated as EBITDA ratio to real revenue.
Cash inflows (adventures) in investment projects are always formed within the framework of the operating activities of the attachment facility.
Net cash flow is calculated as EBITDA minus interest on loans, investment and repayment of the body of the loan.
Awesomewalk flow is considered as EBITDA minus investment in the current year of the investment project life cycle.
Discounted cash flow reflects the net present value of the investment project - NPV. It is this indicator that traditionally perceive as the main measure of the effectiveness of the project under consideration.
Flow management
Proper cash flow management is the basis for the implementation of successful investment activities. At the same time it can take different forms. Cash flow management is operational and strategic. Between these forms, the difference is the same as between tactics and strategy, respectively. The basis of their formation is investment planning. The key factor in creating specific steps on cash flow management is the time.
1. The current planning phase is expressed in the preparation of the payment calendar with the obligatory breakdown by day. This document is distinguished by the maximum degree of development and detail of the alleged tributaries (outlines) of funds.
2. The step of monthly planning is formed on the basis of the annual budget. The plan has been worked out deep enough, but not in detail.
3. The stage of annual planning is built up to a month. It is made on the basis of long-term investment strategy. When forming this plan, it is necessary to take into account the dynamics of the main macroeconomic indicators. Different with middle level of study and detail.
4. The stage of long-term planning is made up for 3-5 years. It is based on the main investment goals and tasks. Detailing is insignificant.
The purpose of the formation of all of the above documents is the maximum accurate modeling of the cash balance at the end of a specific period. On the basis of such calculations, it is possible to assume with a high degree of probability whether the investor has money to implement existing investment projects.
Companies earn money not only from the main business, but also from investment. When the company spends or earns money at the expense of investments, it is necessary to inform about this in the cash flow report. The cash flow from investments is calculated separately from the funds received from the main operating activities.
Investment cash flow
Unlike the income statement, the cash flow report reports only about the funds that were paid by the Company or Company. Suppose that the borrower must pay a loan in size$ 9,000 dollars at the end of September, but instead pays in October. The income statement in September will be listed in September$9 , 000 as an income, but it will not be reflected in the cash flow report until the actual payment in October.
Report on cash flow reflects the flow of funds from 3 types of activities: operating, financial and investment.
Operational activities are a regular business of the company, such as retail sales, household or construction services. Financial flows of funds include the purchase and sale of shares and bonds and the payment of dividends. Investing covers several different species Activities:
Capital expenditures
Financing joint ventures
Placing cash on the reverse repo transaction
Acquisition of shares in associate and joint ventures
Acquisition of subsidiaries, minus the funds received and shareholders
Purchase or sale of fixed assets such as buildings, land or equipment.
Purchase and sale of shares and bonds.
Providing funds and collecting loans.
Standard accounting practice Considers the purchase of fixed assets as an investment. If the leadership is spending$ 800 thousand. This month on the purchase of updated equipment for the plant, this transaction will take into account as a negative entry in the amount of$ 800 thousand. in the cash flow report. If business sells old equipment for$ 300 thousand. This is a positive entry. Following the month, investment cash flow will be in the amount of $ 500 thousand.
Example -Apple
According to the results of the reporting 2017, the companyAppledemonstrated negative investment cash flow in the amount of $ 46, 446 million.
Apple spent over$ 159 billion. for acquisition valuable papers. Wherein, for 2017 redeemed $ 31,775 million. valuable papers, but$94,564 million. it was sold by the company. Among significant articles of investment cash flowAppleit is worth noting the capital costs of$12,451 million.
Analysis
Operational cash flow shows which income generates a company from the main activity. ForApple in 2017he amounted to$63,598 million. Money traffic report separates operational and investment income, since income from profitable investments It can hide what the company does not receive income in the usual way. If management has spent a significant amount for the acquisition of fixed assets, the opposite may occur, and it will distort information, if you do not divide the cash flow to the operational and investment.
If the Corporation works in the industry requiring significant investments in fixed assets, negative cash flow from investment can be a good sign that funds are invested in equipment for their business.
Knowledge of cash flow from investment activity is one of the steps to measure free cash flow - a change in your income for the previous reporting period minus any dividends, working capital and capital costs. Capital costs are included in the cash flow report.
One of the main elements financial Analysis In general, assessments of investment projects in particular is the assessment cash flow (CASH FLOW) C1, C2, ..., C ",generated for a number of time periods as a result of the implementation of a project or the functioning of a particular type of assets.
The calculation of the present value is made only on the basis of a discounting share flow, under which the turnover of money of a certain direction or the type of activity flowing continuously in time. It is advisable under the flow of money to understand the difference between the amounts of money entering the investor to the current account and on the cashier (money tributaries), and the amounts that go from the current account and from the cashier (outflows of money).
The cash flows of the project are classified depending on the individual activities:
Cash flow from investment activities;
Cash flow from operating activities;
Cash flow from financial activities.
Within each of these three types of activities during any settlement period (step) - month, quarter, year - cash flow is characterized by:
but) influx cash equal cash receipts to the current account and on the cashier (inflows of money determine the result of the implementation of the PI in value terms at this step);
b) outflow cash equal to payments at this step;
in) balance(active balance, effect) equal to the difference between the influx and outflow.
For cash flow from investment Activities:
Outflows include capital investments, costs for commissioning work, the cost of liquidation of the project, the costs of increasing working capital, funds invested in additional funds. This also includes non-capitalized costs (payment of tax on land plotused for the project, the cost of construction of external infrastructure facilities). Investment cost information should include information listed by type of costs. The distribution of investment costs in the construction period should be linked to the construction schedule;
To the tributaries - the sale of assets during and at the end of the project (in this case, it is necessary to take into account the payment of appropriate taxes, which will be cash outflows), receipts by reducing working capital.
For cash flow from operational Activities:
The outflows include production costs and taxes;
To the tributaries - revenue from sales, other and non-revenue income, including receipts from funds invested in additional funds.
TO financial activities Operations with funds, external in relation to the PI, that is, incoming not by the implementation of the project. They consist of own capital (Joint-stock for JSC) firm and attracted funds. For cash flow from financial activities:
The outflows include the costs of returning and servicing loans and debt securities issued by the enterprise (in full, regardless of whether they were included in the inflows or additional funds), as well as if necessary, to pay dividends on shares;
The tributaries include the investments of equity and attracted funds (subsidies, subsidies, borrowed money, among other things, at the expense of the company's own debt).
Elements of cash flow C. Can be either independent or related to a specific algorithm. Temporary periods are most often expected. In addition, for simplicity of the presentation of the material in this chapter, it is assumed that the elements of the cash flow are unidirectional ( ordinary), i.e. there is no alternation of outflows and cash inflows ( extraordinary cash flows).
It is also considered that the receipt generated under one time period takes place either at its beginning, or at its end, that is, they are not distributed within the period, but are concentrated on one of its boundaries. In the first case, the stream is called a stream penumrando, or advance, in the second - stream postsenrando.
In practice, a larger distribution was received by the flow of postnamerando, in particular, this flow is based on the methodology for analyzing investment projects. Some explanations can be given on the basis of general principles accounting, according to which it is customary to sum up and evaluate financial results This or that action at the end of the next reporting period.
As for the receipt of funds at the expense of payment, in practice it is most often distributed in time unevenly, and therefore it is more convenient to conditionally attribute all revenues by the end of the period.
Thanks to this agreement, equal time periods are formed, which makes it possible to develop convenient formalized assessment algorithms. The stream of PREMUMENDO is important when analyzing various cash accumulation schemes for subsequent investment.
Optimization of financial, production and investment processes is unthinkable without high-quality analysis. Based on these research and reports, the planning process is carried out, the factors constrained by the development are eliminated.
One species assessment of the effectiveness of financial activities is the calculation cash flow. Formula And the features of the application of this technique will be presented below.
Purpose of Analysis
Formula of money flow Calculated in accordance with certain techniques. The purpose of this analysis is to determine the sources of cash flow into the organization, as well as their consumption for calculating the deficit or an excess of money for the period under study.
To implement such a study in the enterprise, a report on cash flow is being reported. The corresponding estimate is also compiled. With the help of such documents, it is possible to determine whether it is enough to organize a full-fledged investment, financial activity of the company existing cash.
The conducted study allows you to determine whether the organization is dependent on external sources of capital. Also analyzes the dynamics of receipt and disposal of funds in the context of each type of activity. This allows you to work out dividend Policy, predict it in the future period. The cash flow analysis is intended to determine the actual solvency of the organization, as well as its forecast in the short term.
What makes the calculation?
Cash flow, calculation formula which is presented in various methods, requires proper analysis to be able to effectively manage. In the case of the submitted study, the organization gets the opportunity to abide by the balance of its financial means In the current and scheduled period.
Cash flows must be synchronized in their time receipt and volume. Thanks to this, you can achieve good company development indicators, its financial stability. The high degree of synchronization of input and outgoing flows allows you to accelerate the tasks in the strategic perspective, reduce the need for paid (credit) sources of financing.
Finance flow management allows you to optimize cash flow. The risk level in this case is reduced. Effective management will avoid the company's insolvency, increase financial resistance.
Classification
There are 8 main criteria for which cash flows can be grouped by category. Taking into account the methodology according to which calculus was performed, the gross and for the first approach involves to summarize all the cash flows of the enterprise. The second technique takes into account the difference between income and expenses.
On the scale of influence on economic activities Organizations distinguish a common flow for the company, as well as its components (for each division and economic operations).
By type of activity, the production (operating), financial and investment groups are distinguished. In the direction of movement, there is a positive (received) and a negative (retired) flow.
Considering the adequacy of funds, there is an excess and deficit of funds. The calculation can be made in the current or planning period. Also, streams can be classified to a discrete (one) and regular group. Capital can come out and drop out of the organization with the same time interval or chaotically.
Clean thread
One key indicators in the presented analysis is net cash flow. Formula This coefficient is applied when investment analysis Activities. She gives the researcher information about the financial condition of the company, its ability to increase its market value, Attractiveness for investors.
Net cash flow is calculated as a difference between received and retired from the organization of finances for the selected period of time. This is actually the amount between the indicators of financial, operating and investment activities.
Information about the size and nature of this indicator is used in the adoption of strategic decisions the owners of the organization, investors and credit companies. It becomes possible to calculate whether it is advisable to invest in activities specific enterprise or in the prepared project. The presented coefficient is taken into account when calculating the cost of the enterprise.
Flow management
Cash flow rate, formula which is used in the calculations of almost all major organizations, allows you to effectively manage financial flows. For calculations, it will be necessary to determine the amount of received and retired funds for the prescribed period, their main components. Also, the breakdown is performed in accordance with the type of activity that generates a certain movement of capital.
Calculation of indicators can be carried out in two ways. They are called an indirect and direct method. In the second case, these accounts are taken into account. The fundamental component for carrying out this study is the revenue rate of implementation.
The method of indirect calculation involves using an article for analysis accounting balance, as well as a report on income and expenses of the enterprise. For analysts, this method is more informative. It will determine the relationship between profit in the period under study and the number of enterprise money. The impact of changes in balance assets on net profit will also be considered to consider using the presented methodology.
Direct settlement
If the calculation is made at a particular point is determined current cash flow. Formula It is quite simple:
CHDP \u003d CPO + ChPP + CPI, where the CPD is a pure cash flow in the period under study, the FPP is a flow from operating activities, ChPF - from financial transactions, ChPI - in the context of investment activities.
To determine the net cash flow rate you need to use the formula:
ChPD \u003d VDP - IDP, where the VF is the incoming flow of money, the IDP is an outgoing flow of funds.
In this case, the calculation is made for one or more settlement periods. it simple formula. Components from each type of activity must be calculated separately. At the same time it is necessary to take into account all components.
Calculation of pure investment flow
The bulk of the organization's funds at the disposal of the company in this momentcomes from operational cash flow. Formula Calculation of a clean indicator (was presented above) necessarily takes into account this value.
ChPI \u003d BRE + PNA + PDFA + RA + DP - POS + ONP - PNF - PDFA - BCA, where Bas - revenue received from the use of fixed assets, PNA - income from the sale intangible assets, PDFA - income from the sale of long-term financial assets, RA - income for the implementation of shares, DP - interest and dividends, POS - acquired fixed assets, ONP - the rest of the work in progress, PNA is the purchase of intangible assets, PDFA - the purchase of long-term financial assets, BCA - The magnitude of the repurchased own shares.
Calculation of pure financial flow
Formula of money flow Applies the data on pure calculation is made by such a formula:
ChPF \u003d DVF + DDKR + DCKR + BCF - VDKD - VKKD - Yes, where DVF - additional external financing, DDKR - additionally attracted long-term loans, DCKR - additionally attracted short-term loans, BCF - irretrievable special-purpose financing, VDKD - debt payments on VKKD - payments short-term loansYes - Dividend payments to shareholders.
Indirect method
Indirect also allows you to define clean cash flow. Balance formula implies adjustments. This applies data on depreciation, changes in the structure and number of current liabilities and assets.
The calculation of net profit from operating activities is made according to the following formula:
CPO \u003d PE + AOS + Ana - Dz - Z - KZ + RF, where ChP - net profit Enterprises, AOS - Depreciation of fixed assets, ana - amortization of intangible assets, DZ - change accounts receivable In the period under study, W - change of stocks, KZ - a change in quantity accounts payable, RF - change the reserve capital indicator.
The indicator of pure cash flow directly affects changes in the cost of current liabilities and assets of the company.
Free cash flow
Some analysts apply in the process of studying the financial condition of the organization free cash flow. Formula The calculation of the presented indicator is considered in two main aspects. There are free cash flow firms and capital.
In the first case, the company's operating performance indicator. It will deduct investments in fixed assets. This indicator provides information to analytics on the number of finances that remain at the disposal of the company after investment in assets. The presented methodology is applied by investors to determine the feasibility of financing the company's activities.
Free cash flow of capital implies only its own investments of funds from the total number of finances. This calculation is used most often by the shareholders of the company. This methodology is used in the process of assessing the shareholder value of the organization.
Discounting
To compare future financial payments with the current state of value, the discounting technique is applied. This technique takes into account that in perspective money gradually lose its cost regarding the current state of the price. Therefore, the analysis applies discounted cash flow. Formula It contains special coefficient. It is multiplied by the amount of financial flow. This allows you to relate to calculate modern level inflation.
The discounting coefficient is determined by the formula:
K \u003d 1 / (1 + SD) VP, where SD is a discount rate, the time period.
Discount rate is one of the most important elements When calculating. It characterizes which income will receive an investor when attaching its funds into a specific project. This indicator contains information about inflation, profitability in the context of risk operations, profit from risk increases. Also, at the calculations, the refinancing rate is taken into account, the cost (weighted average) capital, deposit interest.
Approaches to optimization
In determining the financial condition of the organization in the calculation discounted cash flow. Formula may not take into account if the indicator is given in the short term.
The cash flow optimization process involves the establishment of the balance between the costs and income of the company. The deficit and excess adversely affect financial condition and stability of the organization.
When a cash deficit decreases liquidity indicators. The solvency also becomes low. Excess funds entails the actual depreciation of temporarily unused funds due to inflation. Therefore, the management of the company should balance the magnitude of incoming and outgoing flows.
Examined what is cash flow, formula Its definitions can make decisions on the optimization of this indicator.
