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Warm-Up Timing Is Everything

Timing Is Everything What problem do you see in this scenario? 15 1 15 Jose gets paid. Rent and bills due date Jose gets paid. 15 1 15 Emilio borrows $500 and plans payback before the 1st. Oops, Emilio will not have the money until the 15th. Emilio gets paid.

I will create a cash flow statement. analyze the information in a cash flow statement to make a business decision.

discuss Go with the Flow

Components of a Financial Plan Break-Even Analysis Income Statement Cash Flow Statement Balance Sheet

Components of a Financial Plan Break Even Analysis: a computation of the point of production at which income from sales equals total fixed and variable costs. Balance Sheet: a report of a company’s assets, liabilities, and net worth on a specific date. Income Statement/Profit-Loss Statement: shows how much revenue came in and costs and expenses associated with earning that revenue over set period of time. Cash Flow Statement: analyzes the cash flow in and out of a company.

What Is Cash Flow? The cash coming in and going out of a company Does not consider non-cash assets or projected expenses or income Cash flows in and out from operating, investing, and financing activities. Cash inflow comes from the sale of goods & services, bank loans, and other sources. Cash outflow includes business purchases, expenditures, and loan payments IN OUT

3 Main Types of Activities/Categories Operating Activities: cash that relates to your primary business Investing Activities: cash that relates to your major purchases (or sales) of fixed assets Financing activities: cash that relates to financing your business such as loans you accept (or make payments on) and investments received or stock repurchases made by the company.

Cash Flow Statement + - + - + - Cash Balance $$’s IN $$’s OUT Operating Sales revenue Interest income Payment to suppliers Payroll + - Investing Equipment sales Property sales Equipment purchase Property purchase Cash Balance + - + - Financing, $ In Loans Received Financing, $ Out Loans Paid

Sample Products Co. Cash Flow Statement Operations For the Year Ending 12-31-2016 Cash at the Beginning of the Year, January 1st, 2015 $15,700 Operations Cash Receipts from customers Cash Paid for Inventory purchases General operating and administrative expenses Wage expenses Interest Income taxes Net Cash Flow from Operations $147,900 ($264,000) ($112,000) ($123,000) ($13,500) ($32,800) $693,200 The time frame of the cash flow sheet can vary depending on the needs of the business. This is a summary of the whole year, but it can also be made for a monthly basis or some other time frame. Analyzing the totals within each section can reveal a lot about a company’s health. This example shows a company that is making a lot of money from its operations. The negative total for investing shows that more property and equipment was purchased and the negative total in financing activities shows that debt is being paid rather than additional debt being taken on. Cash at end of year is calculated by adding (or subtracting) net cash to/from cash at beginning of year/period. Investing Activities Cash Receipts from Sale of property and equipment Collection of principal on loans Cash Paid for Purchase of property and equipment Making loans to others 33,600 ($75,000) $0 Net Cash Flow from Investing Activities ($41,400) Financing Activities Borrowing Repayment of loans Dividends ($34,600) ($53,000) ($87,000) Net Increase / Decrease In Cash 2016 $19,500 Current Net Cash $35,200

Explore Make a Statement

Follow your teachers instructions to complete this activity. Jacy’s Coffee and Sweets Pro-forma Cash Flow Statement For the Year Ending: Follow your teachers instructions to complete this activity. Use the information in the Activity Sheet: Financial Decision Making to create a cash flow statement for Jacy’s Coffee and Sweets. Use the Student Activity Spreadsheet to track your numbers. Cash at the Beginning of the Year: Operations Cash Receipts from customers Cash Paid for Inventory purchases General operating and administrative expenses Wage expenses Interest Income taxes Net Cash Flow from Operations The time frame of the cash flow sheet can vary depending on the needs of the business. This is a summary of the whole year, but it can also be made for a monthly basis or some other time frame. Analyzing the totals within each section can reveal a lot about a company’s health. This example shows a company that is making a lot of money from its operations. The negative total for investing shows that more property and equipment was purchased and the negative total in financing activities shows that debt is being paid rather than additional debt being taken on. Cash at end of year is calculated by adding (or subtracting) net cash to/from cash at beginning of year/period. Investing Activities Cash Receipts from Sale of property and equipment Collection of principal on loans Cash Paid for Purchase of property and equipment Making loans to others Net Cash Flow from Investing Activities Financing Activities Borrowing Repayment of loans Dividends Net Increase / Decrease In Cash 2016 Cash at the end of 2016

Let’s Put A Cash Flow Statement To Good Use: Laser Cat Toys Cash Flow Statement For the Year Ending: Let’s Put A Cash Flow Statement To Good Use: Follow along as we explore several scenarios. Do you think this company is healthy? What would you do as the owner of this business? If you were an investor, would you want to invest in the company? Cash at the Beginning of the Year: Operations Cash Receipts from customers Cash Paid for Inventory purchases General operating and administrative expenses Wage expenses Interest Income taxes Net Cash Flow from Operations Investing Activities Cash Receipts from Sale of property and equipment Collection of principal on loans Cash Paid for Purchase of property and equipment Making loans to others Net Cash Flow from Investing Activities Financing Activities Borrowing Repayment of loans Dividends Net Increase / Decrease In Cash 2016 Cash at the end of 2016

Wrap-up Cash Flows

Cash Flow Is Important What can a cash flow statement tell you about a company? Are they operating well, should they be approved for a loan, would it be wise to invest in the company? Answer What are the four components of a financial plan? Break-even analysis, balance sheet, income statement, cash flow statement Answer What categories are included in a cash flow statement? Operations, Investing Activities, and Financing Activities Answer