5. ch 7 fund analysis & cash flow analysis (c.f)

7/22/2019 5. Ch 7 Fund Analysis & Cash Flow Analysis (C.F)

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Chapter 7 Chapter 7

Funds Analysis, Cash-Funds Analysis, Cash-Flow Analysis, andFlow Analysis, and

Financial PlanningFinancial Planning



Funds Analysis, Cash-FlowFunds Analysis, Cash-Flow

Analysis, and Financial Planning Analysis, and Financial Planning

Flow of Funds (ources and 'ses)tatement

Accounting tatement of Cash Flows

Cash-Flow Forecasting



Flow of Funds Statement Flow of Funds Statement

A summary of a firm*s changes infinancial position from one period to

another+ it is also called a sources anduses of funds statement or a statement

of changes in financial position




All of the firm*s investments and

claims against those in&estments

Extends beyond $ustbeyond $ust transactionsin&ol&ing cashcash

hat are fundsfunds./



Sources andSources and

ses Statement ses Statement

0he letters labelingthe boxes stand for

''sesses, ourcesources, AAssetsssets, and

11iabilitiesiabilities (broadlydefined) 0he pluses

(minuses) indicateincreases(decreases) inassets or liabilities

AA 11

- 22 -

''



!"#s $etermination!"#s $etermination

of Sources and sesof Sources and ses

3 455 - 645 -

747 2 ' 8 -- 9 2 '

3 4,4653 4,465 :;A 9<5 :;A

(=99) :;A

3 7<43 7<4 2 '

85 -- ==< --

3 =,5663 =,566

Cash and CE 3 95Acct >ec <96

?n&entories 797Prepaid Exp 8Accum 0ax Prepay 45

Current AssetsCurrent Assets

33

4,4984,498

Fixed Assets (@Cost) 45<51ess Acc !epr (<=9)

:et Fix Assets:et Fix Assets 3 B543 B54?n&estment, 10 85

ther Assets, 10 ==<

Assets =55B =557 2;- ;'Assets =55B =557 2;- ;'





3 455 345 645 47

747 D5 ' 8 -- 9 4 '

3 4,4653 4,465 :;A

9<5 :;A(=99) :;A

3 7<43 7<4 B5 '

85 -- ==< --

3 =,5663 =,566

Cash and CE 3 95Acct >ec <96

?n&entories 797Prepaid Exp 8Accum 0ax Prepay 45

Current AssetsCurrent Assets

33

4,4984,498

Fixed Assets (@Cost) 45<51ess Acc !epr (<=9)

:et Fix Assets:et Fix Assets 3 B543 B54?n&estment, 10 85

ther Assets, 10 ==<

Assets =55B =557 2;- ;'Assets =55B =557 2;- ;'





3 =98 - ' 96 --

47 -- 455 --

33 858858 :;A

68< 2

=55 --

B=9 -- 48B 2

33 45D745D7 :;A

3 =,5663 =,566

:otes Payable 3 =95Acct Payable 96

Accrued 0axes

47ther Accrued 1iab 455

Current 1iabCurrent 1iab 3 8553 8551ong-0erm !ebt 8<5hareholders* EuityCom toc# (34 par) =55 Add Pd in Capital B=9>etained Earnings =45

0otal Euity0otal Euity 33 4,4<94,4<9

1iabilities and Euity =55B =557 2;- ;'1iabilities and Euity =55B =557 2;- ;'



10



3 =98 3 8 ' 96 --

47 -- 455 --

33 858858 :;A

68< BB

=55 --

B=9 -- 48B 8<

33 45D745D7 :;A

3 =,5663 =,566

:otes Payable 3 =95Acct Payable 96

Accrued 0axes

47ther Accrued 1iab 455

Current 1iabCurrent 1iab 3 8553 8551ong-0erm !ebt 8<5hareholders* EuityCom toc# (34 par) =55 Add Pd in Capital B=9>etained Earnings =45

0otal Euity0otal Euity 33 4,4<94,4<9

1iabilities and Euity =55B =557 2;- ;'1iabilities and Euity =55B =557 2;- ;'



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'E'E 34873487

?ncrease, ?n&entories 3D5

?ncrease, Accum 0ax Prepay 4

!ecrease, :otes Payable 8

?ncrease, :et Fixed Assets B5

34873487

'>CE'>CE

?ncrease, >etained Earnings 3 8<

!ecrease, Accounts >ecei&able 47

?ncrease, 1ong-0erm !ebt BB

!ecrease, Cash 2 Cash Eui&alents 45

% % !asic& Sources!asic& Sources

and ses Statement and ses Statement



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Analy'ing the Sources Analy'ing the Sources

and ses Statement and ses Statement

'ses'ses

Primarily throughan increase in

in&entories and

expenditures oncapital assets

ourcesources

Primarilythrough netprofit from

operations andlong-term debt

increases



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as been replaced by the cash flowcash flowstatementstatement (49D9) in ' audited

annual reports



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"hy ()amine the Flow"hy ()amine the Flow

of Funds Statement of Funds Statement

*(S+./ *(S+./

hy should we bother tounderstand a Flow of Funds

tatement that is no longerreuired to appear in 'audited annual reports/



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"hy ()amine the Flow"hy ()amine the Flow

of Funds Statement of Funds Statement

?ncludes important noncash transactionswhile the cash flow statement does not

?s easy to prepare and often preferred bymanagers for analysis purposes o&er the

more complex cash flow statement elps you to better understand the cash

flow statement, especially if it is preparedunder the indirect method.

+he Flow of Funds Statement:+he Flow of Funds Statement:



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Statement of Cash FlowsStatement of Cash Flows

operating acti&itiesoperating acti&ities,

in&esting acti&itiesin&esting acti&ities, and

financing acti&itiesfinancing acti&ities

0his statement reports cash inflowsinflows and outflowsoutflows based on the firm*s

A summary of a firm*s paymentsduring a period of time



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Cash Flow from perating Acti&ities

hows impact of transactions notdefined as in&esting or financing

acti&ities

0hese cash flows are generally the casheffects of transactions that enter into thedetermination of net income



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Cash Flow FromCash Flow From

perating Activitiesperating Activities

Cash ?nflowsCash ?nflowsFrom sales of goods or ser&icesFrom interest and di&idend income

Cash utflowsCash utflows0o pay suppliers for in&entory0o pay employees for ser&ices

0o pay lenders (interest)0o pay go&ernment for taxes0o pay other suppliers for other

operating expenses



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Cash Flow from Financing Acti&itiesCash Flow from Financing Acti&ities

hows impact of all cash transactionswith shareholders and the borrowing

and repaying transactions with lenders

Cash Flow from ?n&esting Acti&itiesCash Flow from ?n&esting Acti&ities

hows impact of buying and sellingfixed assets and debt or euity

securities of other entities



0


nvesting Activitiesnvesting Activities

Cash ?nflowsCash ?nflowsFrom sale of fixed assets (property, plant,

euipment)

From sale of debt or euity securities (otherthan common euity) of other entities

Cash utflowsCash utflows

0o acuire fixed assets (property, plant,euipment)0o purchase debt or euity securities (other

than common euity) of other entities



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Financing ActivitiesFinancing Activities

Cash ?nflowsCash ?nflowsFrom borrowingFrom the sale of the firm*s own euity

securities

Cash utflowsCash utflows0o repay amounts borrowed

0o repurchase the firm*s own euitysecurities

0o pay shareholders di&idends



2

Cash Flow Forecasting Cash Flow Forecasting

!etermine the future cash needs of the firm Plan for the financing of these needs Exercise control o&er cash and liuidity of

the firm

A Cash GudgetCash Gudget is a forecast of a firm*s futurecash flows arising from collections and

disbursements, usually on a monthly basis

0he financial manager is better able to0he financial manager is better able to



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+he Sales Forecast +he Sales Forecast

ales representati&es pro$ect sales

for the period in uestion (salesunder their control or management)

ales pro$ections are screened andconsolidated for product lines

Product line sales pro$ections areconsolidated into a single forecast

nternal Sales Forecast nternal Sales Forecast



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+he Sales Forecast +he Sales Forecast

Economists pro$ect o&erall

economic and business trends thatwill affect the firm

Expected mar#et share is pro$ectedfor current and new product lines

Product line sales pro$ections areconsolidated into a single forecast

()ternal Sales Forecast ()ternal Sales Forecast



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!"#s Cash Flow Forecast !"#s Cash Flow Forecast

1isa Hiller has finali%ed a cash flowforecast for the first six months of =55D

1isa is expecting 95I of monthly saleswill be credit sales with D5I of creditsales collected in <5 days, =5I in 75

days, and no bad debts.

int 0he cash flow forecast will be usedin forecasting the financial statements

later in this chapter



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Collections and therCollections and ther

Cash 0eceipts 1+housands2Cash 0eceipts 1+housands2

A1EA1E :J !EC KA: FEG

Credit ales, 95ICredit ales, 95I 349< 3=4= 3486 34<8349< 3=4= 3486 34<8

Cash ales, 45ICash ales, 45I =4 =4 =6 =6 4B 4B 48 48

0otal ales, 455I0otal ales, 455I 3=46 3=<7 34B4 34853=46 3=<7 34B4 3485

CA C11EC0?:CA C11EC0?:

Cash sales, currentCash sales, current 3 4B 3 48 3 4B 3 48

D5I of last month*s 479 4=< credit sales=5I of =-month-old <9 6= credit sales

0otal sales receipts0otal sales receipts 3==8 34D5 3==8 34D5



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A1EA1E HA> AP> HAL K':

Credit ales, 95ICredit ales, 95I 3=87 3=58 3475 34953=87 3=58 3475 3495

Cash ales, 45ICash ales, 45I =D =D =< =< 4D 4D =4 =4

0otal ales, 455I0otal ales, 455I 3=D6 3==D 34BD 3=443=D6 3==D 34BD 3=44

CA C11EC0?:CA C11EC0?:

Cash sales, currentCash sales, current 3 =D 3 =< 3 4D 3 =43 =D 3 =< 3 4D 3 =4

D5I of last month*s 45D =58 476 4=D credit sales=5I of =-month-old <4 =B 84 64 credit sales

0otal sales receipts0otal sales receipts 347B 3=88 3=<< 3495347B 3=88 3=<< 3495

Collections and therCollections and ther

Cash 0eceipts 1+housands2Cash 0eceipts 1+housands2



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Schedule of Pro3ected CashSchedule of Pro3ected Cash

$isbursements 1+housands2$isbursements 1+housands2

!EC KA: FEG

PurchasesPurchases 3 <9 3 <8 3 76 3 <9 3 <8 3 76

CA !?G'>EHE:0 F> P'>CAECA !?G'>EHE:0 F> P'>CAE A:! PE>A0?:M ENPE:EA:! PE>A0?:M ENPE:E

455I of last month*s455I of last month*s 3 <9 3 <8 3 <9 3 <8

purchasespurchasesages paidages paid 95 96 95 96

ther expenses paidther expenses paid <6 <6 <6 <6

0otal disbursements (purchases0otal disbursements (purchases

and operating expenses)and operating expenses) 347< 347< 347< 347<



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HA> AP> HAL K':

PurchasesPurchases 3 8< 3 65 3 6D 3 85 3 8< 3 65 3 6D 3 85

CA !?G'>EHE:0 F>CA !?G'>EHE:0 F>

P'>CAE A:! PE>A0?:MP'>CAE A:! PE>A0?:MENPE:EENPE:E

455I of last month*s 3 76 3 8< 3 65 3 6D455I of last month*s 3 76 3 8< 3 65 3 6D

purchasespurchases

ages paidages paid 444 45B 9=444 45B 9= 9=9=ther expenses paidther expenses paid <6 <6 <6<6 <6 <6 <6 <6

0otal disbursements0otal disbursements 3=59 3496 34773=59 3496 3477 34B634B6(purchases and(purchases and

operating expenses)operating expenses)

Schedule of Pro3ected CashSchedule of Pro3ected Cash




0

Schedule of .et CashSchedule of .et Cash


KA: FEG HA>

0otal disbursements for0otal disbursements for 347< 347< 3=59 347< 347< 3=59

purchases and operatingpurchases and operating

expensesexpenses

Capital expendituresCapital expenditures B5 65 5 B5 65 5

!i&idend payments!i&idend payments 5 5 95 5 9

?ncome taxes?ncome taxes =8 5 5 =8 5 5

0otal cash disbursements0otal cash disbursements 3=8D 3=5< 3=4D 3=8D 3=5< 3=4D



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Schedule of .et CashSchedule of .et Cash


AP> HAL K':

0otal disbursements for0otal disbursements for 3496 3477 34B6 3496 3477 34B6

purchases and operatingpurchases and operating

expensesexpenses

Capital expendituresCapital expenditures 5 5 5 5 5 5

!i&idend payments!i&idend payments 5 5 455 5 45

?ncome taxes?ncome taxes =8 5 5 =8 5 5

0otal cash disbursements0otal cash disbursements 3=49 3477 34D6 3=49 3477 34D6



2

KA: FEG HA>

Geginning cash balance 3 95 3 8B 3 <6Geginning cash balance 3 95 3 8B 3 <6

0otal cash receipts0otal cash receipts ==8 4D5 47B ==8 4D5 47B

0otal cash disbursements0otal cash disbursements =8D =8D =5< =5< =4D=4D

:et cash flow:et cash flow 3( 3( <<) 3(<<) 3( =<) 3(=<) 3( 84)84)

Ending cash balanceEnding cash balance

without additional financing 3 8B 3 <6 3( 4B)without additional financing 3 8B 3 <6 3( 4B)

Pro3ected .et CashPro3ected .et Cash

Flows and Cash !alancesFlows and Cash !alances



3

AP> HAL K':

Geginning cash balance 3( 4B) 3 49 3 D7Geginning cash balance 3( 4B) 3 49 3 D7

0otal cash receipts0otal cash receipts =88 =<< 495 =88 =<< 495

0otal cash disbursements0otal cash disbursements =49 =49 477 477 4D64D6

:et cash flow:et cash flow 33 <7 3<7 3 7B 3 77B 3 7

Ending cash balanceEnding cash balance

without additional financing 3 49 3 D7 3 9=without additional financing 3 49 3 D7 3 9=

Pro3ected .et CashPro3ected .et Cash

Flows and Cash !alancesFlows and Cash !alances

5. ch 7 fund analysis & cash flow analysis (c.f)

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