Overview of Cash Flow Management

The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.

to generate cash flows from its operations, a company may not be able to survive in the future: cash

We need to have sufficient information and right tools for cash flow forecast. Sometimes this cash flowing forecast are likely to be more accurate than other types of complex problem. For example a company started their business with £5,000 and their first month’s sale is £5,500, so their end of sales would be £66,000 and expenses would be £55,440 and their net cash flow is £10,503.

Predicting and managing cash flow. To manage cash flow effectively you must keep a watchful eye on finances. So the business owner should be forecasting and revising their cash flow forecast on a daily basis however, if the finances of the business are more stable then forecasting cash flow weekly or monthly is enough. Cash flow is so important to a business because identity’s shortfalls in cash balances in advance.

If the company has a business where large amounts of cash investments are required in order to earn the revenue, they will have a shortage of cash even if they are profitable. Also, if they keep expanding as they get the money from the profit, there will always be a cash shortage since they do not keep the excess cash within the company. Also, if the company pays high amounts of dividends along with the high profit, the excess cash that comes with the profits will be going out as dividends and returning the company to its previous cash position.

Annual Cash Budget - Year 1 Assumptions January February March April May June July August September October November December Sales 100% 22,814 24,399 25,984 27,569 30,769 32,324 35,494 38,664 38,664 32,324 29,154 25,984 Cash Inflows: 364,143 6.27% 6.70% 7.14% 7.57% 8.45% 8.88% 9.75% 10.62% 10.62% 8.88% 8.01% 7.14% Cash 22,814 24,399 25,984 27,569 30,769 32,324 35,494 38,664 38,664 32,324 29,154 25,984 Loan Proceeds 175,000 Total Inflows: 197,814 24,399 25,984 27,569 30,769 32,324 35,494 38,664 38,664 32,324 29,154 25,984 Cash Outflows: Purchases 38.00% 8,669.32

2. Forecast the firm’s financial statements for 2002 and 2003. What will be the external financing requirements of the firm in those years? Can the firm repay its loan within a reasonable period? In order to forecast the financial statements of 2002 and 2003, the following assumptions need to be made. The growth of sales is 15%, same as 2001, which is estimated by managers. The rate of production costs and expenses per sales is constant to 50%. Administration and selling expenses is the average of last 4 years. The depreciation is $7.8 million per year, which is calculated by $54.6 million divided by 7 years. Tax rate is 24.5%, which is provided. The dividend is $2 million per year only when the company makes profits. Therefore, we assume that there will be no dividend in 2003. Gross PPE will be $27.3 million (54.6/2) per year. We also assume there is no more long term debt, because any funds need in the case are short term debt, it keeps at $18.2 million. According to the forecast, Star River needs external financing approximately $94 million and $107 million in 2002 and 2003, respectively. In order to analysis if the company can repay the debt, we need to know the interest coverage ratio, current ratio and D/E ratio. The interest coverage ratios through the forecast were 1.23 and 0.87 respectively, which is the danger signal to the managers, because in 2003, the profits even not

Cash flow is one of the most important aspects of running any business whether large or small. It is one of the single most important reasons why many businesses fail, this does not matter whether how good a business is. Managing a cash flow therefore is vitally important in the smooth running survival and success of a business.

On the other hand, there are several components that must be identified when looking at incremental cash flows which include: The initial outlay, cash flows from taking on the project, terminal cost or value and the scale and timing of the project. This means that a positive incremental cash flow is a good indication that an organization should spend time and money investing in the project. Operating Cash Flow (OCF) is a measure of the amount of cash that a company generates at their normal business operation. However, operating cash flow is important because it is an indicator of whether a company is able to generate sufficive amount of cash flow to maintain and grow its operations or whether it may require external financing to launch the project.

Resort. co is a private company that operates luxury hotel properties. They have uncollateralized term loans (Original Debt) with Bank A of $129.6 million and Bank B of $302.4 million that totals $432 million. There was issuance costs of $3 million ($900,000 for Bank A and $2.1 million for Bank B) for loans given. The maturity date of the Original Debt is December 31, 2020. Because of lower than expect travel during the holiday season, Resort. co projected a short-term cash flow shortage and would not be able to meet the short term requirements of the Original Debt.

1. Cash that comes into or goes out of a person's or company's account. Cash flow can come from any number of sources and is crucial for a business' continued operation and a person's continued survival. Cash inflow may come from wages, salary, sales, loans, revenue from operations, or even personal gifts. Cash outflow usually comes from expenses and investments. It is crucially important to maintain a positive net cash flow insofar as

2. Magnetronics had $7,380 invested in accounts receivables at year-end 1999. Its average sales per day were $133,614 during 1999 and its average collection period was 55.23 days. This represented an improvement from the average collection period of 58.68 days in 1995.

The main problem of the company is that it couldn’t liquidate a seasonal working capital loan for the requisite 30 days each year. It reflects the company doesn’t have sufficient cash and they need more loan but the bank is reluctant to give any unless the company can give a reliable financial plan to show they can pay off their loan by the end of 2012. So, Mr Malik came up with a financial forecast for the month to month operation to gain the bank’s trust. Sadly, the forecast portrays it cannot afford to pay off its debt by end of 2012 and would owe a balance of IND 3,858.00. This

The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.

The project proposal will be critical analysed before it will established in South Korea. In the first assignment will looked in depth in political, country risk, FDI theories and motive for the project. In the second assignment, the cost of capital for the project was calculated, stating the risk for both the parent and subsidiaries.