Module 5 Determining Cashflow Importance of cashflow statement Essentially, setting the scene for what is about to follow. How and where revenue is being generated. It describes the various revenue streams the business will be putting in place and how each revenue stream will bring in money.

The ability of the business to generate enough cash to meet financial obligations without disrupting the business operations. Liquidity. Cost of Operations Loan Repayments Capital Asset Purchases Investments Dividends Taxes Cash Reserve Sales Collection Other Income Equity Loans

Generally, companies that have a lot of working capital will be more successful since they can expand and improve their operations. Companies with negative working capital may lack the funds necessary for growth. Working Capital. It represents the amount of day-by-day operating liquidity (cash reserve) available to the business and how much in liquid assets a company has available to build its business.

WORKING CAPITAL = Current Assets - Current liabilities Current Assets Inventory Debtors Deposits Cash Current Liabilities Creditors Loans Taxation, EPF, Socso Bonus Dividend

Working Capital Cycle Cash Reserves Cash Payments Revenue Production Withdrawals – dividend etc Equity & Loans

Financial needs = working capital + fixed assets + operational costs + contingencies Working Capital Meet day-to-day operating costs; Fixed Assets Investment in land, buildings, equipment, etc., Operational Costs Marketing, production, administration, etc.Contingencies Meet possible changes in environment.

Managing Cashflow/Working Capital The goal is to ensure that the business: ~ is able to continue its operations; ~ has the ability to satisfy maturing short-term debt; and ~ meet operational expenses.

Determining Cashflow Statement