Analysis of the cash flow of the enterprise

Table of contents:

Analysis of the cash flow of the enterprise
Analysis of the cash flow of the enterprise
Anonim

In the process of activity, each manufacturing enterprise contacts various companies and individuals, increasing the circle of partners through payments made in cash. Money with the highest liquidity (assets) is able to ensure the fulfillment of any obligations. They belong to the most important category of funds involved in the turnover. Their presence in the required volumes will ensure the prosperity and stable stability of the company, further successful existence, and also increase the degree of its invulnerability. Competent financial analysis of cash flow is the key to effective asset management of the company.

cash flow analysis
cash flow analysis

Money is the basis of prosperity

Finance in the form of cash is in cash, stored in bank accounts - settlement, current, special accounts of the target direction, special, and also present in the form of letters of credit, deposits and investments in shares. Money is needed to carry out current business operations, make planned and unforeseen payments, which is often required for successful business.

Need for analytical work

Cash in an amount that provides financial stability to a well-managed enterprise is essentially an insurance stock designed to successfully cover the imbalances in financial flows that arise from time to time. And the amount of this amount should be such that it is enough to make all the necessary priority payments. To obtain a correct idea of the dynamics of the movement of the organization's finances, to assess the balance of receipts and payments, as well as to synchronize the amount of profit received with the state of finance, an analysis of the cash flow should be carried out.

cash flow analysis methods
cash flow analysis methods

Main goals

During the analysis, the financial information of the company undergoes analytical processing in part:

  • comparing the results of the enterprise with data for similar past periods;
  • determine the influence of various factors on the company's performance;
  • determining shortcomings in the activities of the company, unused opportunities, opening up reserves and development prospects.

When processing the results of analytical work, decisions are justified and made to optimize the functioning of the company as a whole and eliminate individual negative situations. From well-established accounting and correct analytical assessment, an objective perception of information about the company's financial position, its prospects and solvency is achieved.

Analysis of cash flow and competent management of financial flows include calculating their turnover, analyzing the structure and forecasting dynamics, determining the required optimal level of finance, as well as developing and compiling the company's payment budgets. To ensure effective management of funds, cash flows should be classified correctly.

analysis of the cash flow of the enterprise
analysis of the cash flow of the enterprise

Classification

Analysis of the cash flow of an enterprise involves grouping financial flows in several directions:

  • scale of the outreach process – across operations, divisions and the company as a whole;
  • activities;
  • direction of movement - positive and negative;
  • flow volume calculation method – gross or net;
  • level of volume adequacy – excess or deficit;
  • temporal estimate - present or future flow;
  • continuity of formation - regular or discrete flow.

Main tasks of analysis

A good cash flow analysis is essential to ensure:

  • operational constant control of the safety of cash at the cash desk of the company;
  • monitoring the use of funds for their intended purpose;
  • debt control and timely settlements with debtors and creditors;
  • qualitative analysis of the company's current and absolute liquidity.

Where can I get data for analysis?

The main information base for the analytical work of the relationship between the dynamics of financial flows and working capital are:

  • main accounting form BO-1 – balance sheet;
  • profit and loss statement - Form 2;
  • Cash Flow Statement Form 4.

Balance sheet introduces the analyst to the general condition and availability of funds. The report in form No. 4 reflects the amounts of receipts, disposals and changes in the structure of finance for various types of activities during the reporting period.

cash flow analysis
cash flow analysis

Cash flow analysis methods

The economy uses direct and indirect methods. Direct is based on information about the amount of money received for a certain period, revenue and expenses incurred. In other words, the calculation of proceeds from operating activities, sales of services and products, received advances and other income, as well as the calculation of their disposal - the cost of paying bills, accounts payable, repayment of loans, etc.

Indirect analysis of cash flows is carried out on the basis of data on the financial result obtained in the analyzed period, and consists in identifying the regularity and magnitude of financial flows in dynamics, as well as in determining the final results. Both of these methods are applied in combination, reflecting the actual state of finances in conjunction with other performance indicators of the company.

Direct organization cash flow analysis

This method involves calculating the amount of income from activities. Form No. 4 report, which serves as an information database, is built on the separation of cash flows from activities:

  • current or operating, which determines the amount of revenue from sales of goods and services, received loans, advances and income after reducing the amount of costs incurred from this activity;
  • investment, fixing the dynamics of finances aimed at the acquisition, sale or technical re-equipment of fixed assets, as well as the purchase of intangible assets;
  • financial, aimed at obtaining loans of various maturity, repayment of debts to credit institutions, payment of dividends, financial investments.

Direct analysis of the company's cash flow is based on the main financial indicators of the 4th reporting form and traditionally makes it possible to control their value, as well as determine the level of solvency of the company.

cash flow analysis example
cash flow analysis example

Indirect method

This method allows you to calculate indicators characterizing the volume of net financial flow, and the degree of relationship between them and the profit received. It is based on the methodology for recalculating the obtained financial result with adjustments to the amount of net profit. The use of this method is unacceptable in the analysis of flows from investment and financing activities. In this case, only the direct method is applicable.

The discrepancy between the amount of monetary assets and the size of the financial result is due to the fact that the formation of profit occurs on an accrual basis, and the dynamics of cash is measured on a cash basis.

In addition, separate incomes and expenses are formed without affecting the amount of profit and the structure of finances. For example, depreciation affects the formation of profits without reducing the amount of cash, and payments to debtors in the reporting period, on the contrary, increase the amount of monetary assets without affecting the financial result of the company.

Using an indirect cash flow analysis, make the necessary adjustments related to:

  • with temporary mismatches in the reflection of income and expenses in accounting for inflows and outflows of funds;
  • with transactions that do not affect the calculation of net income, but cause changes in cash flow;
  • with operations that affect the calculation of profits, but do not change the amount of finances.

The starting point for the indirect method of analyzing the dynamics of money is net profit, the amount of which is presented in the report of form No. 2. Then the amounts are adjusted (the profit indicator decreases or increases) that are not related to the movement of financial flows. To streamline comparative data for the analyzed period, the following system is used: the turnover of the active account is marked with a minus sign, and its decrease is marked with a plus sign, and, conversely, the turnover of a passive account is marked with a plus sign, its decrease is marked with a minus sign.

indirect cash flow analysis
indirect cash flow analysis

Example of cash flow analysis

Let's analyze the dynamics of the company's finances based on the aggregated balance sheet data. The table below shows similar data in thousand rubles.

Asset at the beginning of the period end of period Passive at the beginning of the period end of period
Fixed assets 3600 3000 Share Capital 2500 3010
Stocks 2130 2910 Retained earnings 3450 4033
Finished products 230 540 Bank loans 650 530
Settlements with debtors 1090 1450 Accounts payable 546 820
Cash 96 493
Balance 7146 8393 Balance 7146 8393

During the analysis, additional information was used: depreciation of fixed assets - 350 thousand rubles, proceeds from their sale - 300 thousand rubles. and their residual value - 250 thousand rubles.

Below is an analysis of the cash flow statement in thousand rubles.

Indicator Arrival Expense
Starting balance 96
Net profit margin 583
OS depreciation 350
Stock increase 780
Increase in the balance of finished products 310
Growth in receivables 360
Growth in accounts payable 274
Loan burden reduction 120
Total for current activities 1207 1570
Net cash flow from operating activities -363
Investment activity 250
Financial activity 510
Company net cash flow 597
Year end balance 493

Using the methods of cash flow analysis, the economist makes a conclusion about the state of the company's finances. The presented example showed a decrease in the company's net cash flow in comparison with the data of the previous year, from which we can conclude that an impressive share of the profit was directed to the capitalization of assets. In the future, this should ensure the growth of net financial flows from current activities.

cash flow statement analysis
cash flow statement analysis

What the analysis is for

Conducting analytical work due to the need for effective financial management, which consists in:

  • improving profitability as a key indicator of a company's financial he alth;
  • growth in the pace of development of the company and its financial stability;
  • stabilizing the rhythm of the production process, excluding failures in making payments;
  • reducing the company's need for leverage;
  • rational and economical use of domestic financial resources;
  • increasing the rate of capital turnover to ensure the growth of generated profits;
  • reducing the risk of the company's insolvency.

Analysis of cash flow accounting and active methods of financial management enable the company to receive additional profit directly generated by its monetary assets, i.e. effectively use the free balance of funds in accumulated investment resources.

Recommended: