1. Planning and Managing your business cash flow
-Part 2- Advanced
Powerful tools and techniques based on real experience

2. Learning outcomes
• Understand the 3 cash flow activities
• Be able to differentiate between different cash flow
formats
• Analyze your cash flow statement
• Understand the importance of forecasting
• Understand short term and long term forecasting
• Make short term and long term forecasts
• Understand the concept of “free cash flow”
• Calculate free cash flow to firm (FCFF) and free cash flow to equity (FCFE)
• Understand the concept of “cost of trade”
• Calculate the NPV of the cost of trade and make the right decision

3. Objectives of a well designed cash
management system (1/2)
Keep corporate
Increase return funds safe under Finance your
from excess/idle varied economic long term
cash situations expansion
Objectives
Keep cash
Increase available for
profitability of operational
operations needs
Control cash
inflows and
outflows

4. What are the sections of the cash flow
statement?
Day to day
Operating cash
activities that
flow
create revenue
Purchase and sale
Cash Flow Investing cash flow
of investments
Obtaining or
Financing cash flow repayment of
capital

5. Cash flow analysis; Cash Flow Ratios
Formula What it measures
Performance ratios
Cash flow to revenue Operating cash flow / Cash generated per dollar
Revenue of revenue
Cash return on assets Operating cash flow / Cash generated from all
Average total assets resources
Cash to income Operating cash flow / Cash generating ability of
Operating income operations
Coverage ratios
Debt coverage Operating cash flow / Total Financial risk and financial
debt leverage
Interest coverage (Operating cash flow + Ability to meet interest
Interest paid + Taxes paid) / obligations
Interest paid
Reinvestment Operating cash flow / Cash Ability to acquire assets
paid for long term assets with operating cash flows

6. Short Term Forecast
Shows how much
Helps avoid
Determine the cash cash is available
scheduling large
requirements for for temporary
payments at times
financial investments
when cash position
operations is low
Helps minimize the
company’s cost of
Great accuracy maintaining credit
lines and
borrowing
Recommended
method for short
Determine the Short term term forecasting is
need for short- forecasting the cash receipts
term financing
and disbursement
method

7. Long Term Forecast
Helps decide how much Helps decide how long
Shows the long term money should be will it take to repay
growth borrowed the borrowed funds
Assist management in Shows how financing
securing the funds decisions affect the
necessary to finance capital structure
corporate plans
Long term
forecasting Helps determine what
Less detailed and less projects should be
accurate approved, deferred, or
abandoned
Note: Both direct and indirect method can be used for long term
forecasting, and it is best to do a forecast of both, since each one will allow
you to see your cash flow from a different angle.

8. Thank You For Coming Today!
Facilitator: Antoine Tabbakh
Tel: +961 1 385 825 / website: www.bsf-lb.com
Email: info@bsf-lb.com
/BestSolutionFinance Company/bsf #bsfbeirut