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6. Cash Flow Analysis Extracting Cash Flow series from the Business Plan. Profitability calculations over the lifetime of the investment, NPV and IRR 15.

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Presentation on theme: "6. Cash Flow Analysis Extracting Cash Flow series from the Business Plan. Profitability calculations over the lifetime of the investment, NPV and IRR 15."— Presentation transcript:

1 6. Cash Flow Analysis Extracting Cash Flow series from the Business Plan. Profitability calculations over the lifetime of the investment, NPV and IRR 15 November 2018 Cash Flow

2 Using models is like using glasses to see things better!
15 November 2018 Cash Flow

3 Overview 6.1 Difference between Cash Flow and Operating Statement
6.2 Cash Flow from Operations 6.3 Source and Allocation of Funds (optional) 6.4 Critical Cash Flow Ratios 6.5 Profitability Measures 6.6 Graphical Representation 15 November 2018 Cash Flow

4 Difference between Cash Flow and Operating Statement
Op. Statem.: Cash Flow: Issued bills vs Paid bills => debtor & creditor changes Inventory movem. vs Working Capital Depreciation vs Repayments Taxes paid year later Dividend paid year later 15 November 2018 Cash Flow

5 Cash Flow from Operations
Operating Surplus Cash Flow before Tax Cash Flow after Tax Net Cash Flow Cash Movements 15 November 2018 Cash Flow

6 Cash Flow from Operations
15 November 2018 Cash Flow

7 15 November 2018 Cash Flow

8 Trying to make your model look nicer?
15 November 2018 Cash Flow

9 Source & Allocation of Funds
Source of funds Profit before Tax + Depreciation + Drawdown Allocation of Funds Investment + Repayment + Paid Tax & Dividend Changes in Net Current Assets (Cash, Debtors, Stocks, Creditors) 15 November 2018 Cash Flow

10 Source & Allocation of Funds
15 November 2018 Cash Flow

11 15 November 2018 Cash Flow

12 Analysis of Changes in Net Current Assets
15 November 2018 Cash Flow

13 Critical Cash Flow Ratios
For each year of operation: Debt Service Coverage = Cash Flow after Tax / (Repayment + Interest of Loans) Loan Life Cover Ratio = NPV of Cash Flow after Tax for rest of lifetime / Principal of Loans Both ratios should be > 1.5 15 November 2018 Cash Flow

14 Cash Flow Ratios 15 November 2018 Cash Flow

15 15 November 2018 Cash Flow

16 Profitability Measures
Total Project Cash Flow and Net Cash & Equity Flow Net Present Values and Internal Rate of Return Accumulation of NPV over planning horizon 15 November 2018 Cash Flow

17 Some things come back again and again!
15 November 2018 Cash Flow

18 Total and Net Cash Flow 15 November 2018 Cash Flow

19 Net Present Value and Internal Rate of Return
15 November 2018 Cash Flow

20 NPV accumulated over planning horizon
15 November 2018 Cash Flow

21 Internal Rate of Return
15 November 2018 Cash Flow

22 You will be stuck with this model forever!
15 November 2018 Cash Flow

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