The company's cash is a very important element of its financial activities, since it includes all cash that may be in the cash desk of the company, as well as existing non-cash bank accounts, possible money in transit, and various monetary payment documents.
The analysis of cash flows allows the company to ensure their balance and provide the ability to forecast in the near and distant future, which positively affects the efficiency and profitability of the enterprise as a whole. Thus, it turns out that analytics in the field of the movement of financial and cash flows is the key to financial stability and prosperity of the company in future periods and time intervals.
General concept
In simpler handling, cash flow can be understood as its receipt and expenditure over a certain period of time in the company.
In the scientific literature, this term refers to the movement of funds in the time interval as a continuous process relating to the concept of "cash flow". It is cash flow management that is the main goal of the company.
Accounting and analysis of cash flows in the company allows you to evaluate how realistic all possible sources of cash flow are, as well as how correctly all expenses of the company are justified, determines the necessary need for financing.
Report Submission
The type of reporting under study is an accounting document that indicates the totality of all data on the company's cash and various equivalents (for example, financial investments, bank deposits on demand, etc.).
This reporting form can be completed by the accountant by the end of the study year and is not interim reporting. The report form is regulated by Order No. 66n, as well as PBU 23/2011. OKUD report form - 0710004.
An analysis of the cash flow statement is a way of obtaining very valuable information about the state of financial flows in a company.
In the study of this form of reporting, one should take into account the moment of separation of the company's cash flows into three large groups: current operations, investment operations and operations related to non-current assets.
Moreover, the cash from current operations may include those that form the final result of the company, that is, its profit. They are related to the current activities of the company by profile. It also includes flows on various financial investments that are acquired for resale in a short period of time.
The cash on activities in the direction of investment include operations that are associated with non-current assets, financial investments (other than those indicated above).
Transactions with finances and related cash flows involve the use of borrowed funds (receipt and repayment), settlements with business owners and founders.
If it is not possible to determine clear criteria for assigning cash flow, then it is attributed to current operations.
In general, the analysis of the cash flow statement is a very important analytical step carried out by the financiers of the company in the study of its effectiveness.
In the investigated report form, an analysis of all three of the above groups of flows is carried out using special methods, which will be discussed below.
Analysis Methods Used
To study this section, we consider the main methods of cash flow analysis, among which there are direct and indirect options.
The first of these methods is combining and analyzing the accounting data of the company, which reflects information about the movement of all company funds by profiles and areas of activity. This method provides the opportunity to obtain conclusions regarding the level of sufficiency of available finances and funds to pay for the expenses of the company.
The use of indirect analysis techniques for the company ensures the relationship of profit with the change in monetary indicators in the time interval. This method consists in the fact that the company's statements on the balance sheet and other forms are rearranged in order to convert financial indicators into cash flow indicators.
Explore the methods in more detail below.
Direct method
The use of this analysis method gives the organization the following features:
- evaluate the main sources of financial inflows and the main directions of outflows in the company;
- assess the adequacy of funds to cover the current obligations of the company, that is, its liquidity;
- shows the relationship between company revenue and product sales over a time interval.
This method mainly examines the data obtained regarding the gross income of the firm, as well as its net cash flow (PPP) during the study period. With its help, it is possible to reflect the total volume of income and expenditure of financial resources of the company, as well as its individual directions by type of business.
When applying a direct analysis of cash flows, a formula is used that determines the final NDP:
ChDP = R + PP-Z-ZP-ZPA-NB-NP-PV,
where R - sold products, thousand rubles;
PP - other cash receipts from the current operations of the company, thousand rubles;
- expenses for the purchase of goods and materials (raw materials, materials) from suppliers, thousand rubles;
- salary only to operational personnel, thousand rubles;
ZPA - salary in relation to administrative workers, thousand rubles;
NB - tax payments to the budget, thousand rubles;
NP - tax payments to extrabudgetary spheres, thousand rubles;
PV - other payments in the operating sector of the company, thousand rubles
At the next stage, we calculate the amount of VDP for all areas of activity (investment, operating, financial), as well as the calculation of the total total value.
Indirect method
An indirect analysis method allows you to identify the interdependence of various areas of the company, as well as between its net profit and asset dynamics over a certain period of time.
In the framework of this method, the following formula can be used to calculate the VDP only for operating activities:
ChDP = state of emergency + AOS + ANA ± DZ ± Z ± KZ ± P,
where PE is the value of the company's net profit, thousand rubles;
AOS - total depreciation data on fixed assets, thousand rubles;
ANA - total depreciation data on intangible assets, thousand rubles;
DZ - change / dynamics of receivables, thousand rubles;
- change / dynamics of inventories, thousand rubles;
KZ - change / dynamics of payables, thousand rubles;
R - change / dynamics of the company's funds (reserves, etc.), thousand rubles
The obtained data on the amount and structure of cash flows, which are determined by one of the methods method, economists apply in the following sequence:
- a study of the dynamics of the volume of income;
- the growth rates of the final cash flow are compared with the growth rates of the company's active assets, production and sales indicators;
- the analysis of the dynamics of the value of expenses.
Another method
Among the less popular analysis methods, the liquid cash flow method is also used, with which you can evaluate the financial condition of the company at the moment.
With this method, use the formula:
DLP = { 1 + 1 - 1 ) - { 0 + 0 - 0 ),
where DK 1 ; DK 0 - long-term loans and borrowings at the end and at the beginning of the billing period;
QC 1 ; KK 0 - loans and borrowings in the short term at the beginning and end of the year;
DS 1 ; DS 0 - cash balance at the end and beginning of the billing period.
The methodology of the analysis on a specific example
The application of the studied methods of financial analysis of cash flows will be carried out on a specific example.
For this, we take two periods of 2016-2017 for the company Astra LLC.
In the table, we present a specific example of an analysis of cash flows based on the data of the company's receipts and payments for 2016.
The main income and payments of LLC Astra in 2016.
Indicator | total amount | Including ongoing activities | Including investment activity | Including financial activities |
Parish, thousand rubles | 2479640 | 2477540 | 2100 | 0 |
Arrival,% | one hundred | 99.92 | 0.08 | 0 |
Consumption, thousand rubles | -2276285 | -2141141 | -135144 | 0 |
Expense% | one hundred | 94.06 | 5.94 | 0 |
The final balance, thousand rubles | 203355 | 336399 | -133044 | 0 |
As can be seen from the table, in Astra LLC the share of income from current activities is maximum and amounts to 99.92% in 2016, as well as the share of expenses from current activities is 94.06%.
The main income and payments of LLC Astra in 2017.
Indicator | total amount | Including ongoing activities | Including investment activity | Including financial activities |
Parish, thousand rubles | 3869274 | 3860274 | 9000 | 0 |
Arrival,% | one hundred | 99.7 | 0.23 | 0 |
Consumption, thousand rubles | -3914311 | -3463781 | -450530 | 0 |
Expense% | one hundred | 88.49 | 11.51 | 0 |
The final balance, thousand rubles | -45037 | 396493 | -441530 | 0 |
As can be seen from the table, in Astra LLC, the share of income from current activities is maximum and amounts to 99.7% in 2016, as well as the share of expenses from current activities is 88.49%.
Next, in the table, we carry out a horizontal analysis of the proceeds of LLC Astra.
Horizontal analysis of the income of LLC Astra in 2016-2017, thousand rubles
Indicator value | 2016 year | 2017 year | Absolute deviation |
1. Buyers' funds | 2437311 | 3821830 | 1384519 |
2. Revenue from OS sales | - | - | - |
3. Share proceeds | - | - | - |
4. Income from loans to other organizations | - | - | - |
5. Other | 42329 | 47444 | 5115 |
TOTAL | 2479640 | 3869274 | 1389634 |
The table below presents a vertical and factor analysis of the income of LLC Astra in 2016-2017.
Vertical and factor analysis of the income of LLC Astra in 2016-2017, thousand rubles
Indicator value | 2016 year | 2017 year | Absolute deviation |
1. Buyers' funds | 98.29 | 98.77 | 0.48 |
2. Revenue from OS sales | - | - | - |
3. Share proceeds | - | - | - |
4. Income from loans to other organizations | - | - | - |
5. Other | 1.71 | 1.23 | -0.48 |
TOTAL | one hundred | one hundred | - |
Next, we analyze the areas of spending money on current operations of LLC Astra.
Horizontal analysis of expenses of Astra LLC in 2016-2017, thousand rubles
Indicator value | 2016 year | 2017 year | Absolute deviation |
1. Payment of goods and raw materials | -1582183 | -2752087 | -1169904 |
2. Personnel costs | -221155 | -263101 | -41946 |
3. Payment of dividends | - | - | - |
4. Payment of taxes, fees | -88679 | -137169 | -48490 |
5. Purchase of fixed assets | -135144 | -436530 | -301386 |
6. Loan repayment | - | - | - |
7. Other | -249124 | -325424 | -76300 |
TOTAL | -2276285 | -3914311 | -1638026 |
When analyzing the cash flow of the enterprise according to the table, an increase in the value of expenses of LLC Astra in 2017 is noticeable.
The table below presents data on vertical and factor analysis of spending.
Vertical and factor analysis of expenses of Astra LLC in 2016-2017, thousand rubles
Indicator value | 2016 year | 2017 year | Absolute deviation |
1. Payment of goods and raw materials | 69.51 | 70.31 | 0.8 |
2. Personnel costs | 9.72 | 6.72 | -3 |
3. Payment of dividends | - | - | - |
4. Payment of taxes, fees | 3.9 | 3,5 | -0.4 |
5. Purchase of fixed assets | 5.94 | 11.15 | 5.21 |
6. Repayment of loan obligations | - | - | - |
7. Other | 10.94 | 8.31 | -2.63 |
TOTAL | one hundred | one hundred | - |
Using the direct method on a concrete example
The table below shows the key indicators calculated using the direct cash flow analysis method.
Cash flow indicators by the direct method, thousand rubles
Indicator value | 2016 year | 2017 year | Absolute deviation |
1. The initial balance | 118951 | 322306 | 203355 |
2. The arrival of all | 2479640 | 3869274 | 1389634 |
2.1. on current activities | 2477540 | 3860274 | 1382734 |
2.2. on investment activities | 2100 | 9000 | 6900 |
2.3. for financial activities | - | - | - |
3. Consumption of all | -2276285 | -3914311 | -1638026 |
3.1. on current activities | -2141141 | -3463781 | -1322640 |
3.2. on investment activities | -135144 | -450530 | -315386 |
3.3. for financial activities | - | - | - |
4. The remainder is final | 322306 | 277269 | -45037 |
5. VFR | 203355 | -45037 | -248392 |
5.1. on current activities | 336399 | 396493 | 60094 |
5.2. on investment activities | -133044 | -441530 | -308486 |
5.3. for financial activities | - | - | - |
According to the table, when analyzing the cash flow of the organization Astra LLC, it can be noted that the positive moment is the excess of the amount of cash inflow over their expenditure, which indicates the company's liquidity in 2016. However, the financial situation in the company in 2017 has changed, as evidenced by the opposite picture of the excess of spending over their income.
Using the indirect method on a concrete example
In the next step, we consider the use of the indirect method in the form of a table below.
Construction of cash flows using the indirect method, thousand rubles
Indicator value | 2016 year | 2017 year |
1. Net profit | 506847 | 546279 |
2. Amortization Amount | (1155223) | (751977) |
3. Non-current assets | 14 173 | 181 889 |
4.Changing stocks | 53 921 | 131,242 |
5.Changing accounts receivable | 445 324 | 37,887 |
6. Change in other current assets | 17 647 | (10 969) |
7. Increase in accounts payable | (20 182) | 75 607 |
8. The disposal of non-current assets | 92 456 | 87,650 |
9.Dynamics | (45 037) | 297 608 |
Using the indirect method, it is noticeable that the adjusted cash flow reflects that the company does not have a discrepancy between the amount of profit and the availability of money.
When analyzing cash flows using the indirect method, a number of coefficients are calculated, among which there are:
K1 = ( + ) / ,
where DSNP - money at the beginning of the year, thousand rubles
DSP - money received, thousand rubles.
DSi - the money spent, thousand rubles.
We carry out the calculation in relation to our company LLC Astra.
Calculation of solvency ratio K1 for LLC Astra.
Indicator | 2016 year | 2017 year |
Start money | 118951 | 322306 |
Money received | 2479640 | 3869274 |
Money spent | 2276285 | 3914311 |
Coefficient K1 | 1.14 | 1,07 |
This ratio allows you to determine whether the organization is able to ensure its payments from the balance of funds. In our calculations, it turns out that Astra LLC is able to, since this ratio should be more than 1. This means that the company does not have a shortage of money to pay off its expenses.
K2 = DSp / DSi.
We carry out the calculation in relation to our company LLC Astra
Calculation of solvency ratio K2 for LLC Astra
Indicator | 2016 year | 2017 year |
Money received | 2479640 | 3869274 |
Money spent | 2276285 | 3914311 |
Coefficient K2 | 1.09 | 0.99 |
Since this ratio is also positive in 2016, the company is able to cover its obligations with available money. But in 2017, the value of the indicator is below 1, which is already a negative trend.
KB = (PP + Am) / (DO + KO),
where state of emergency - net profit, thousand rubles
Am - the amount of depreciation, thousand rubles
TO - long-term liabilities, thousand rubles
KO - liabilities in the short term, thousand rubles
We carry out the calculation in relation to our company LLC Astra
Calculation of the Beaver coefficient
Indicator | 2016 year | 2017 year |
State of emergency | 91257 | 506847 |
Am | 0 | 0 |
BEFORE | 15842 | 15005 |
KO | 155213 | 135031 |
Beaver coefficient | 0.53 | 3.38 |
The standard for this indicator is defined in the framework of 0.4-0.45.
The value of the indicator was higher than recommended, which indicates that the organization has problems with solvency.
Conclusion
The main goal, which is pursued in the analysis and management of cash flows, is to strengthen the stability of the financial system of the company and its liquidity at the current and future point. It also aims to develop a favorable financial strategy and tactics of the company. Since the analysis of cash flow is the initial stage, it depends on how well and correctly it is performed that determines the possibility of developing the company's prospects and determining its financial capabilities in the near future.