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Cash Flow

FINANCE

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24 views7 pages

Cash Flow

FINANCE

Uploaded by

glopez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Corporate Finance I

Professor:
Andres Falquez

By:
Xavier Achi
Glenda López
INDEX

1. Cash Flow
a. Definition
b. Importance
c. Cash flow identity
2. Cash Flow from assets
a. Formula
b. Definition
c. What involve?
d. Operating cash flow
e. Capital spending
f. Change in Net Working Capital
3. Cash Flow to creditors and stockholders
a. Definition
b. Cash Flow to creditors
c. Cash Flow to stockholders
4. Example of Cash Flow (Almixa S.A )
5. Conclusion
By cash flow, we simply mean the difference between the number of dollars that came in
and the number that went out.

The measurement of cash flow can be used:


 To evaluate the state or performance of a business or project.
 To determine problems with liquidity.
 To examine income or growth of a business.

Cash Flow from Assets  the total of cash flow to creditors and cash flow to stockholders.

The Cash Flow identity formula:


Cash flow to creditors
+ Cash flow to stockholders
= Cash Flow from assets

Cash flow from assets involves three components:


 Operating Cash Flow
 Capital Spending
 Change in Net Working Capital.

Operating Cash Flow  refers to the cash flow that results from the firm’s day-to-day
activities of producing and selling.
Formula:
Earnings before interest and taxes (EBIT)
+ Depreciation
- Taxes
= Operating Cash Flow
Capital spending  net capital spending is just money spent on fixed assets less money
from the sale of fixed assets.
Formula:
Ending net fixed assets
- Beginning net fixed assets
+ Depreciation
= Net Capital Spending

Change in Net Working Capital  to determine the change in NWC, the easiest approach
is just to take the difference between the beginning and ending net working capital.
Formula:
Ending NWC
- Beginning NWC
= Change in NWC

Cash Flow to Creditors a firm’s interest payments to creditors less net new borrowing.
Formula:

Interest paid
- Net new borrowing
= Cash flow to creditors

Cash Flow to Stockholder  dividends paid out by a firm less net new equity.
Formula:

Dividends paid
- Net new equity raised
= Cash flow to stockholder
Almixa S.A

It was a company that initiated its activities in April, 2006. It is a company of advertising,
which has as principal product the Publimesas that consists of putting advertising on the top
of tables located in different establishments of the city.

Balance Sheet

2006 2007 2006 2007

Current Assets Current Liabilities


Cash $ 12,843.37 $ 546.75 Account payable $ 13,964.89 $ 3000.00
Account
receivable $ 1,527.45 $ 1,000.00 Note payable $ 282.77 $ -
Inventory $ 2,659.30 $ 6,067.00 Total $ 14,247.66 $ 3,000.00
Total $ 17,030.12 $ 7,613.75
Long term debt $ - $ -
Fixed assets
Net plant and $ 32,659.30 $ 36,067.00 Owners equity
equipment Common Stock and $ 2,000.00 $ 1,000.00
paid-in surplus
Retain earnings $ 33,441.76 $ 39,680.75
Total $ 35,441.76 $ 40,680.75

Total assets $ 49,689.42 $ 43,680.75 Total liabilities & equity $ 49,689.42 $ 43,680.75
Income Statement

Sales $ 15,917.57
COGS $ 7,067.00
Depreciation $ 612.71
EBIT $ 8,237.86
Interest $ 823.79
Taxable income $ 7,414.07
Taxes $ 2,446.64
Net income $ 4,967.43

RE $ 3,725.57
Dividend per share $ 1,241.86

Cash Flow from Assets

Operating Cash Flow


Earnings before interest and taxes $ 8,237.86
Depreciation $ 612.71
Taxes $ 2,446.64
OCF. $ 6,403.93

Capital Spending
Ending net fixed assets $ 36,067.00
Beginning net fix assets $ 32,659.30
depreciation $ 612.71
Net Capital $ 4,020.41

Change in Net Working Capital


Ending NWC $ 4,613.75
Beginning NWC $ 2,782.46
Changes in NWC $ 1,831.29

Cash flow from assets


Operating cash flow $ 6,403.93
Net capital spending $ 4,020.41
Change in NWC $ 1,831.29
Cash flow from assets $ 552.23
Cash Flow to Creditors and Stockholders

Cash flow from creditors


Interest Paid $ 823.79
Net new borrowing $ -
Cash flow from creditors $ 823.79

Cash flow from stockholders


Dividends paid $ 1,241.86
Net new equity raised $ 1,513.42
Cash flow from stockholders $ 271.56

Conclusion:
As we can see in the numbers, ALMIXA S.A. is a small company that hasn’t present a
growth and that if the numbers keeps the same tendency; the company will be in
bankruptcy, because the amount of sales won’t be able to cover all the expenses that the
company has.

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