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FINANCE Cash flows financial planning

MBA 2006 Cash flows financial planning. |2. Sources of Cash Inflow and Cash Outflow. Operating Activities Sales of goods and services. Investing Activities Sale of fixed assets Sales of LT financial assets. Financing Activities Issuance of stocks and bonds LT and ST borrowing. Operating Activities Purchase of supplies Selling, general and administrative expenses Tax expenses.

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FINANCE Cash flows financial planning

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    1. FINANCE Cash flows + financial planning Solvay Business School Université Libre de Bruxelles Fall 2006

    2. MBA 2006 Cash flows + financial planning |2 Sources of Cash Inflow and Cash Outflow

    3. MBA 2006 Cash flows + financial planning |3 Exemple numérique

    4. MBA 2006 Cash flows + financial planning |4 Cash flow opérationnel

    5. MBA 2006 Cash flows + financial planning |5 Tableau de financement

    6. MBA 2006 Cash flows + financial planning |6 Notations Income statement REV Revenue CGS Cost of goods sold SGA Selling, general and administrative expenses Dep Depreciation EBIT Earnings before interest and taxes Int Interest expenses TAX Taxes Tc Tax rate NI Net income Balance sheet FA Fixed assets, net AR Accounts receivable INV Inventories CASH Cash & cash equivalents SE Equity capital LTD Long term debt AP Accounts payable STD Short-term borrowing Statement of retained income DIV Dividendes

    7. MBA 2006 Cash flows + financial planning |7 Income statement and balance sheet Income statement EBIT = REV - CGS - SGA - Dep TAX = Tc (EBIT - Int) NI = EBIT - Int - TAX Balance sheet equation FA + AR + INV + CASH = SE + LTD + AP + STD Working capital requirement: WCR ? AR + INV - AP =(Current assets - CASH) - (Current liabilities - STD) Summarised balance sheet: FA + WCR + CASH = SE + D (D = LTD + STD)

    8. MBA 2006 Cash flows + financial planning |8 Cash flow statement : indirect method ?FA + ?WCR + ?CASH = ?SE + ?D ?FA = CAPEX - Dep CAPEX = Acquisitions - Disposals (investing & divesting) ?SE = NI - DIV + ?K ?K = New issuance of capital (NI + Dep - ?WCR) - (CAPEX) + (?K + ?D -DIV) = ?CASH

    9. MBA 2006 Cash flows + financial planning |9 Statement of cash flows: direct method + Cash collection from customers - Cash payment to suppliers and employees - Cash paid for interest - Cash paid for taxes = Cash flow from operating activities + Cash flow from investing activities + Cash flow from financing activity = ?CASH REV - ?AR CGS + ?INV + SGA - ?AP Int TAX (REV-CGS-SGA-Int-TAX)- ?WCR -CAPEX ?K + ?D - DIV

    10. MBA 2006 Cash flows + financial planning |10 Free Cash Flow Free Cash Flow = Cash flow from operating activities + Cash flow from investing activities Free Cash Flow = DIV - ?K - ?D + ?Cash Calculating free cash flows of all equity firm: Free Cash Flow = EBIT(1-TC) + Dep - ?WCR - CAPEX Statement of cash flows for all-equity firm: Free Cash Flow = DIV - ?K + ?Cash

    11. MBA 2006 Cash flows + financial planning |11 Financial Forecasting

    12. MBA 2006 Cash flows + financial planning |12 Financial Planning Based on ?Revenues Assumptions on key ratios relating ?Revenues to: Gross margin: m = EBITDA /Revenues Working capital requirement: w = ? WCR / ? Revenues Net fixed assets: a = ? NFA / ? Revenues Financial policy: Payout ratio p = DIV/Net Income Depreciation d = Depreciation / Fixed Assets-1 Environment: Tax rate TC Cost of debt i

    13. MBA 2006 Cash flows + financial planning |13 Data Revenues year 0: 2,000 Growth rate year 1: 25% Balance sheet end year 0

    14. MBA 2006 Cash flows + financial planning |14 Step 1: Income statement

    15. MBA 2006 Cash flows + financial planning |15 Step 2: Statement of Cash Flows

    16. MBA 2006 Cash flows + financial planning |16 Step 3: Update balance sheet

    17. MBA 2006 Cash flows + financial planning |17 The Full Model

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