Cash flow analysis

Study and forecast of cash flow -the subject of attention is not only the specialists of financiers. The world practice pays special attention to this issue because of the emerging problems with cash. Objective unevenness of receipts and payments can cause such problems. The cause may be the result of unforeseen circumstances. Regardless of the reason for the absence of cash, the enterprise can face very serious consequences.

Period of turnover of funds

Calculations of the duration of periods of circulation of moneyare incorporated in the analysis of cash flows. Evidence of serious financial difficulties is the lack of even a small margin of money. The real losses of the enterprise are indicated by excessive amounts of money associated with the depreciation of money and inflation, or with the lost opportunity of profitable allocation of money and, as a result, the receipt of additional revenues. Qualitative analysis of cash flows - the need to monitor the situation, the ability to plan financial and economic activities for the future.

The period of turnover of money means the time, the action of which begins from the moment of cash receipt to the settlement account and until the time of the withdrawal of money.

The analysis of the company's cash assets includesitself real movement of money at the enterprise, an estimation of synchronism of receipt and expenditure of financial assets, coordination of the size of the received result with a condition of financial assets.

The analysis of cash flow flows is associated with changes in the size and composition of equity capital, as well as loans of the enterprise together with bank loans.

Issue of money

Own capital can undergo changesdue to the money increase in the authorized capital received by issuing income in the release of money into circulation, which led to a general increase in the circulation of the money supply. Domestic practice considers the formation of a financial result in the current activity.

Analysis of cash flows is based on two methods: direct and indirect.

Direct method of analysis

With the direct method of analysis carried outcomparison of absolute amounts of income and expenditure of money by type of activity: current, investment and financial activities. This method has its advantages, expressed in the ability to assess the total amount of the arrival and expenditure of the company's monetary resources, to determine the articles that generate the greatest inflow or outflow of money in the sphere of activities. The forecasting of cash flows relies on the information that was obtained using this method.

A significant disadvantage of the method is that the relationship between the financial result and changes in cash held in the accounts of the enterprise can not be established.

The indirect method of analysis

Analysis of cash flows, based on indirect method, allows, using dataprofit and loss statements, accounting information and balance sheet, which are formed in the journal of accounting, determine the cause of the difference in the indicators and the reason for the effect on net cash flow.

The indirect method is based on a detailedadjustment of net income or net loss, taking into account all transactions, any accruals or deferrals for prior periods, or future cash flows, and payments. Profit in this activity is the starting point.

Using an indirect method of analyzing motionmoney, it is possible to explain the reasons for the discrepancy between the amount of profit and the change in cash for the reporting period. The regrouping of the balance sheet information, the annex to the balance sheet of Form 5, the adjustment of the profit and loss account for the recalculation of financial flows into cash.