The company's cash is a very important element of its financial activity, as it includes all cash that may be in the company's cash desk, as well as existing non-cash bank accounts, possible money in transit and various monetary payment documents.
Conducting a cash flow analysis allows the company to ensure their balance and provide the ability to predict in the near and distant future, which has a positive effect on the efficiency and profitability of the enterprise as a whole. Thus, it turns out that analytics in the field of financial and cash flows is the key to the financial stability and prosperity of the company in future periods and time intervals.
General concept
In a simpler way, cash flow can be understood as their receipt and expenditure over a certain period of time in a company.
In scientific literature underthis term means the movement of funds in the interval of time 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 flow in the company allows you to assess how real all possible sources of cash receipts are, as well as how well all expenses of the company are justified, determines the necessary need for financing.
Report presentation
The type of reporting under study is an accounting document that indicates the totality of all data on the company's available cash and their various equivalents (for example, financial investments, bank demand deposits, etc.).
This reporting form can be completed by an accountant by the end of the study year and is not interim reporting. The form of the report is regulated by Order No. 66n, as well as PBU 23/2011. OKUD report form - 0710004.
Analyzing the cash flow statement is a way of obtaining very valuable information about the state of financial flows in a company.
When studying this form of reporting, one should take into account the moment of dividing the company's cash flows into three large groups: current operations, investment operations and operations related to non-current assets.
At the same time, cash from current operations can 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 streamsvarious financial investments that are purchased for resale in a short period of time.
Cash for activities in the direction of investment can include operations that are associated with non-current assets, financial investments (other than those indicated above).
Finance operations and related cash flows involve the use of borrowed funds (receipt and return), settlements with owners and founders of the business.
If it is not possible to determine clear criteria for attributing 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.
The report form under study analyzes all three of the above groups of flows using special methods, which will be discussed below.
Applied methods of analysis
To study this section, consider the main methods of cash flow analysis, among which there are direct and indirect options.
The first of these methods is the combination and analytics of the company's accounting data, which reflects information on the movement of all company funds by profiles and areas of activity. This method provides an opportunity to draw conclusions regarding the level of adequacy of available finances and funds to pay the company's expenses.
Application of the technique of indirectanalysis for the company provides the relationship of profit with changes 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 regrouped in order to convert financial indicators into cash flow indicators.
Explore methods in more detail below.
Direct method
The use of this method of analysis gives the organization the following opportunities:
- estimate the main sources of inflow of funds and the main directions of outflows in the company;
- assess the adequacy of funds to cover the company's current liabilities, that is, its liquidity;
- shows the relationship between a company's 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 (NPF) during the study period. With its help, it is possible to reflect the entire volume of income and expenditure of financial resources of the company, as well as in its individual areas by type of management.
When applying direct cash flow analysis, a formula is used that determines the final NPV:
NPV=R+PP-W-ZP-ZPA-NB-NP-PV, where Р is sold products, thousand rubles;
PP - other cash receipts from the current operations of the company, thousand rubles;
З - expenses for the purchase of goods and materials (raw materials) from suppliers, thousand rubles;
ZP - wages only for operational personnel, thousand rubles;
ZPA - wages for administrative workers, thousand rubles;
NB – tax payments to the budget, thousand rubles;
NP – tax payments to non-budgetary spheres, thousand rubles;
PV - other payments in the operating area of the company, thousand rubles.
At the next stage, we calculate the amount of NPV for all areas of activity (investment, operating, financial), as well as the calculation of the final total value.
Indirect method
The indirect method of analysis allows you to identify the interdependence of various areas of the company's activities, as well as between its net profit and the dynamics of assets over a certain period of time.
With this method, you can use the following formula to calculate NPV for operations only:
NDP=PE + AOS + ANA ± DZ ± Z ± KZ ± R, where PE is the value of the company's net profit, thousand rubles;
AOS - total depreciation data for fixed assets, thousand rubles;
ANA – total depreciation data on intangible assets, thousand rubles;
DZ - change / dynamics of accounts receivable, thousand rubles;
З - change / dynamics of stocks of goods and materials, thousand rubles;
KZ - change / dynamics of creditors, thousand rubles;
P - change / dynamics of the company's funds (reserves, etc.), thousand rubles.
The data obtained on the amount and structure of cash flows, which are determined by one of the methods, are used by economists in the following sequence:
- ongoingstudy of the dynamics of the volume of cash receipts;
- the growth rate of the final cash flow is compared with the growth rate of the company's active assets, volumes of production and sales indicators;
- an analysis of the dynamics of expenditures is being carried out.
Another method
Among the less popular methods of analysis, the liquid cash flow method is also used, with which you can assess the financial condition of the company at the moment.
With this method, the formula is used:
DLP={DK1 + KK1- DS1)-{DK 0 + KK0 – DS0), where DK1; DK0 - long-term loans and borrowings at the end and at the beginning of the billing period;
QC1; KK0 – loans and borrowings in the short term at the beginning and end of the year;
DS1; DS0 - cash balance at the end and beginning of the billing period.
Methodology for conducting analysis on a specific example
The application of the studied methods of financial analysis of cash flow will be carried out on a specific example.
For this, let's take two periods of 2016-2017 for Astra LLC.
In the table, we present a specific example of cash flow analysis based on the company's receipts and payments for 2016.
Main receipts and payments of Astra LLC in 2016.
| Indicator | Total amount | Bincluding ongoing activities | Including investment activities | Including financial activities |
| Income, thousand rubles. | 2479640 | 2477540 | 2100 | 0 |
| Arrival, % | 100 | 99, 92 | 0, 08 | 0 |
| Expense, thousand rubles. | -2276285 | -2141141 | -135144 | 0 |
| Expense, % | 100 | 94, 06 | 5, 94 | 0 |
| Final balance, RUB thousand | 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%.
Main receipts and payments of Astra LLC in 2017.
| Indicator | Total amount | Including ongoing activities | Including investment activities | Including financial activities |
| Income, thousand rubles. | 3869274 | 3860274 | 9000 | 0 |
| Arrival, % | 100 | 99, 7 | 0, 23 | 0 |
| Expense, thousand rubles. | -3914311 | -3463781 | -450530 | 0 |
| Expense, % | 100 | 88, 49 | 11, 51 | 0 |
| Final balance, RUB thousand | -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 receipts of Astra LLC funds.
Horizontal analysis of revenues of Astra LLC in 2016-2017, thousand rubles
| Indicator value | 2016 | 2017 | Absolute deviation |
| 1. Buyers' funds | 2437311 | 3821830 | 1384519 |
| 2. Revenue from the sale of fixed assets | - | - | - |
| 3. Share proceeds | - | - | - |
| 4. Proceeds from loans to other organizations | - | - | - |
| 5. Other | 42329 | 47444 | 5115 |
| TOTAL | 2479640 | 3869274 | 1389634 |
The table below shows a vertical and factor analysis of Astra LLC revenues in 2016-2017
Vertical and factorial analysis of Astra LLC revenues in 2016-2017, thousand rubles
| Indicator value | 2016 | 2017 | Absolute deviation |
| 1. Buyers' funds | 98, 29 | 98, 77 | 0, 48 |
| 2. Revenue from the sale of fixed assets | - | - | - |
| 3. Share proceeds | - | - | - |
| 4. Proceeds from loans to other organizations | - | - | - |
| 5. Other | 1, 71 | 1, 23 | -0, 48 |
| TOTAL | 100 | 100 | - |
Next, we analyze the directions of spending money on current operations of Astra LLC.
Horizontal analysis of expenses of Astra LLC in 2016-2017, thousand rubles
| Indicator value | 2016 | 2017 | Absolute deviation |
| 1. Payment for goods and raw materials | -1582183 | -2752087 | -1169904 |
| 2. Personnel costs | -221155 | -263101 | -41946 |
| 3. Dividend payment | - | - | - |
| 4. Payment of taxes, fees | -88679 | -137169 | -48490 |
| 5. Purchase of fixed assets | -135144 | -436530 | -301386 |
| 6. Repayment of credit obligations | - | - | - |
| 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 Astra LLC in 2017 is noticeable.
The table below shows vertical and factor analysis of spending.
Vertical and factor analysis of the expenses of Astra LLC in 2016-2017, thousand rubles
| Indicator value | 2016 | 2017 | Absolute deviation |
| 1. Payment for goods and raw materials | 69, 51 | 70, 31 | 0, 8 |
| 2. Personnel costs | 9, 72 | 6, 72 | -3 |
| 3. Dividend payment | - | - | - |
| 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 | 100 | 100 | - |
Application of the direct method on a concrete example
The table below shows the main indicators calculated using the direct method of cash flow analysis.
Indicators of cash flows under the direct method, thousand rubles.
| Indicator value | 2016 | 2017 | Absolute deviation |
| 1. Starting balance | 118951 | 322306 | 203355 |
| 2. The arrival of everything | 2479640 | 3869274 | 1389634 |
| 2.1. for current activities | 2477540 | 3860274 | 1382734 |
| 2.2. for investment activities | 2100 | 9000 | 6900 |
| 2.3. for financial activities | - | - | - |
| 3. Total consumption | -2276285 | -3914311 | -1638026 |
| 3.1. for current activities | -2141141 | -3463781 | -1322640 |
| 3.2. for investment activities | -135144 | -450530 | -315386 |
| 3.3. for financial activities | - | - | - |
| 4. The remainder is final | 322306 | 277269 | -45037 |
| 5. NPV | 203355 | -45037 | -248392 |
| 5.1. for current activities | 336399 | 396493 | 60094 |
| 5.2. for investment activities | -133044 | -441530 | -308486 |
| 5.3. for financial activities | - | - | - |
According to the data in the table, when analyzing the cash flow of the Astra LLC organization, it can be noted that a positive moment is the excess of cash receipts over their expenditures, which indicates the company's liquidity in 2016. However, the financial situation in the company changed in 2017, as evidenced by the reverse picture of the excess of spending over their income.
Application of the indirect method on a concrete example
Next stepconsider the use of the indirect method in the form of a table below.
Construction of cash flow by indirect method, thousand rubles.
| Indicator value | 2016 | 2017 |
| 1. Net profit | 506847 | 546279 |
| 2. Amortization amount | (1155223) | (751977) |
| 3. Non-current assets | 14 173 | 181 889 |
| 4. Stock change | 53 921 | 131 242 |
| 5. Change in receivables | 445 324 | 37 887 |
| 6. Change in other current assets | 17 647 | (10 969) |
| 7. Increase in accounts payable | (20 182) | 75 607 |
| 8. Disposal of non-current assets | 92 456 | 87 650 |
| 9. Dynamics | (45 037) | 297 608 |
When using the indirect method, it is noticeable that the adjusted cash flow reflects that the company has no discrepancy between the amount of profit and the presence of cash.
When analyzing cash flow using the indirect methodcalculate a number of coefficients, among which are:
solvency ratio K1
K1=(DSnp+DSp)/ DSi, where DST is money at the beginning of the year, thousand rubles.
DSp - money received, thousand rubles.
DSi - money spent, thousand rubles.
We carry out the calculation in relation to our company Astra LLC.
Calculation of solvency ratio K1 for Astra LLC.
| Indicator | 2016 | 2017 |
| Money for starters | 118951 | 322306 |
| Money received | 2479640 | 3869274 |
| Money spent | 2276285 | 3914311 |
| Coefficient K1 | 1, 14 | 1, 07 |
This ratio measures whether an organization is able to meet its payouts from the balance of funds. In our calculations, it turns out that Astra LLC is just in a position, since this coefficient should be more than 1. This means that the company does not have a shortage of money to pay off its expenses.
Solvency ratio K2:
K2=DSp/DSi.
We carry out the calculation in relation to our company Astra LLC
Calculation of solvency ratio K2 for Astra LLC
| Indicator | 2016 | 2017 |
| 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.
Beaver ratio:
KB=(PE+Am)/ (TO+KO), where NP is net profit, thousand rubles.
Am – depreciation amount, 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 Astra LLC
Calculation of the Beaver coefficient
| Indicator | 2016 | 2017 |
| PE | 91257 | 506847 |
| Am | 0 | 0 |
| TO | 15842 | 15005 |
| KO | 155213 | 135031 |
| Beaver Ratio | 0, 53 | 3, 38 |
The standard for this indicator is defined within 0, 4-0, 45.
The value of the indicator was higher than recommended, which indicates that the organization has solvency problems.
Conclusion
The main goal, which is pursued in the analysis and management of cash flows, is to strengthen the stability of the company's financial system and its liquidity at the current and prospective moment. It also aims to develop a favorable financial strategy and tactics of the firm. Since the cash flow analysis is the initial stage, the ability to develop the company's prospects and determine its financial capabilities in the near future depends on how well and correctly it is performed.
