2. Learning outcomes
• Understand the concept of cash flow
• Differentiate between cash and profit
• Calculate cash flow
• Drivers of cash flow
• Understand how working capital affects your cash flow
• Analyze operating and net operating cycle
• Understand how your business and sector affects your cash flow
• Understand the advantages of equity and debt financing
• Understand the concepts of factoring, sale and leaseback, leasing
• Differentiate between finance and operating leases
3. Roots = Financing Activities
Trunk & Branches = Investing Activities
Fruit = Operating Activities
Businesses are like Fruit Trees !
4. Main conclusions by analysts after the
collapse of large firms:
Conclusions
Cash is the only
certain reality in
financial
reporting. This is
why cash is KING
Current cash
position and
future expected
cash flow are the
main
determinants of
the short term
survival of the
company
Numbers in the
P&L and Balance
Sheet require
judgment
because they can
be highly
manipulated
5. What are the main drivers of cash
flow?
Payment to
Creditors / Account
payable
Stock Levels /
Inventory
Collection of
Debtors / Account
receivable
Capital Expenditure
Drivers of
cash flow
6. There are 3 main methods that can help
you evaluate your capital expenditure:
7. How to ensure your overseas cash flow?
(1/2)
Risks associated
with overseas
sales
Difference in distance
Difference in time zones
Difference in language
Foreign exchange risk
Since overseas
sales are more
risky than
home sales
you should be
looking for
higher margins
to compensate
for the higher
risks.
8. Ways to decrease
overseas cash flow
risks, ensure your
collection of cash
flow, and help you
collect your cash
more quickly
Credit
Insurance
Bank
Draft
Letter of
Credit
How to ensure your overseas cash flow?
(2/2)
9. Positive WC
Decrease operating
cash flow
Negative WC
Increase operating
cash flow
Working capital = (change in AR + change in Inventory) – (change in
AP)
What is working capital? (2/2)
10. • Operating cycle = number of days of inventory + number of days of
receivables
Operating cycle for Company X = 42 + 17 = 59 days (Ref. slide 29 & 36)
Thus, it takes the company 59 days from its purchases of inventories to its
collection of cash.
• Net operating cycle = operating cycle – number of days of payables
Net operating cycle for Company X = 59 – 31 = 28 days (Ref. slide 46)
Thus, it takes Company X 28 days to collect cash from customers after
paying its dues to it suppliers.
Operating and Net Operating Cycles
(1/2)
11. Why is the role of a finance manager
important for your company’s success?
Talk to
prospective
investors
Talk to the
bank
manager
about
funding
requirements
Keep proper
accounting
records
Produce the
3 financial
statements
Report
performance
to regulatory
authorities
Day to day
cash flow
management
Forecasting
Preparing
financial data
for
management
Local
accounting
firm
Self employed
qualified
accountant
who
specializes in
helping small
firms.
Experienced
accountant
who wants
to work part
time
12. Thank You For Coming Today!
Tel: +961 1 385 825 / website: www.bsf-lb.com
Email: info@bsf-lb.com
Facilitator: Antoine Tabbakh
/BestSolutionFinance Company/bsf #bsfbeirut
