06/05/2025
The image is a simplified cash flow forecast diagram, showing the key components and flow of data used to forecast a company's cash flows. Here's a summary:
Main Components:
1. Inputs:
Revenue Drivers
Cost Drivers
Tax, Interest
Sales, Purchases/COGS
DSO (Days Sales Outstanding)
Investment Plans
Maintenance, Repair
Useful Lives, Depreciation
New Financing, Dividends
2. Income Statement Forecast:
Combines all the key financial drivers to estimate profit.
3. Adjustments to Profit:
Non-cash items added back to calculate Net Working Capital.
4. Cash Flow Categories:
Operational CF: Based on profit and working capital.
Investing CF: From investment plans and assets disposal.
Financial CF: Includes debt schedule and equity schedule from financing and dividend plans.
5. Final Output:
The Cash Flow Forecast combines operational, investing, and financial cash flows.
Great! Here's a section-by-section breakdown of the simplified cash flow forecast model in the diagram:
1. Income Statement Forecast (Core of the Model):
This is the starting point. It’s built using the following drivers:
Revenue Drivers – Sales growth, pricing, volume.
Cost Drivers – Variable and fixed costs, salaries, etc.
Tax & Interest – Based on applicable rates and debt structure.
It results in Profit (Net Income).
2. Add Back Non-Cash Items:
To get from profit to cash:
Add back non-cash items like depreciation and amortization (they reduce profit but don’t affect cash).
3. Net Working Capital Forecast:
Adjusts for changes in:
Accounts Receivable (AR Forecast) – Cash not yet received.
Accounts Payable (AP Forecast) – Bills not yet paid.
Inventory Forecast – Goods bought but not sold.
These changes impact cash flow from Operations.
4. Investing Cash Flow (Investing CF):
Investment Plans – Cash outflow for new assets.
Assets Disposal – Cash inflow from selling old assets.
Net of these gives Investing CF.
5. Financing Cash Flow (Financial CF):
Debt Schedule – New loans or repayments.
Equity Schedule – New shares issued or buybacks.
Dividends – Cash paid to shareholders.
New Financing – Capital raised from debt or equity.
These form the Financial CF.
6. Final Cash Flow Forecast:
Combine:
Operational CF
Investing CF
Financing CF
This gives the projected cash position of the company...
