Direct cash flow
As part of the direct cash flow, all cash operating income and operating expenses are netted.
| Operational cash flows | Examples | |
| + | cash income | Payments from sales, payment of accounts receivable, other payments |
| – | Cash expenses | Personnel expenses, payment of liabilities, expenses for materials and goods, other payments |
| = | Cash flow (ie p.) |
Examples of expenditures are wages and salaries, material costs, taxes and the interest expense for borrowed capital. Income includes sales, subsidies and interest income from investments. The outstanding claims are a specialty. Although they are sales revenue, they have not yet become effective in terms of cash and cash equivalents. In this respect, at the end of the period, the sales revenue is reduced by the changed receivables portfolio, which is subtracted. The basis of calculation for the effectiveness of payment is the income statement, profit and loss account, namely according to the total cost method. In contrast, the P&L based on the cost of sales method is not an applicable basis for direct cash flow determination.
Cash flow formula shown in detail (indirect determination)
According to polyhobbies.com, there is no uniform, binding calculation basis for calculating the cash flow. However, the following formula can be used to determine the cash flow and thus the cash position at the end of the fiscal year:
| +/- | position | |
| 1. | Annual surplus | |
| 2. | + | Depreciation |
| 3. | – | Attributions |
| 4. | + | Increase in provisions |
| 5. | – | Decrease in provisions |
| 6. | + | Other non-cash expenses |
| 7. | – | Other non-cash income |
| 8. | – | Gain from the disposal of fixed assets |
| 9. | + | Loss on disposal of fixed assets |
| 10. | – | Inventory increase of finished and unfinished goods |
| 11. | + | Inventory reduction of finished and unfinished goods |
| 12. | – | Increase in trade accounts receivable |
| 13. | + | Acceptance of the accounts receivable from delivery and service |
| 14. | + | Increase in trade payables |
| 15. | – | Decrease in payables from deliveries and services |
| 16. | + | Payment from extraordinary items |
| 17. | – | Payouts from extraordinary items |
| 18. | = | Cash flow from operating activities (operational CF) |
| 19. | Payment through the disposal of fixed assets | |
| 20. | – | Payments for investments in fixed assets |
| 21. | + | Payments from disposals of financial assets |
| 22. | – | Payments for investments in financial assets |
| 23. | = | Cash flow from investing activities |
| 24. | Payments through capital increases | |
| 25. | – | Payment to company owners (e.g. dividend) |
| 26. | = | Cash flow from financing activities |
| 18. | CF from ongoing business activities (operational CF) | |
| 23. | + | CF from investing activities |
| 26. | + | CF from financing activities |
| = | Total cash flow | |
| + | Cash and cash equivalents at the beginning of the financial year | |
| = | Cash and cash equivalents at the end of the financial year |
Excel template for the calculation
The MS Excel spreadsheet program from Microsoft is ideal for calculating cash flow. The calculation template can be created independently, that is, independently; alternatively, it can be downloaded from the Internet. The templates offered by Microsoft are a good option for a cash flow Excel template . Every professional Excel template is a financing model with overviews for CF and P&L up to the balance sheet. In addition, depending on the quality, such a download template is equipped with graphics and separate calculations or with a scenario manager or even a cash flow waterfall. The Excel template is fully functional from the start, can be used indefinitely, is freely adaptable and can be expanded as required.
Features include:
- consistent use of cell format templates
- automatic generation of overviews, parameters, graphics or model results
- clear structure of the table pages with links, with control and plausibility checks
The discounted cash flow method
The DCF, as this cash flow method is called, is used in the broadest sense to determine the company value as such. The term makes it clear that goodwill results from discounting several forms of cash flows. In this respect, the DCF is part of the overall assessment process. Discounting is a computational process in mathematics as a compounding or compounding of interest. All DCF methods are based on the future payment surpluses with cash flows and payment flows that have been determined as precisely and realistically as possible within the corporate planning. They are discounted to the valuation date using the cost of capital. Taxes to be paid such as corporation tax , trade tax or income tax are included in the assessment .
The net present value resulting from the result, also known as the present value, is the discounted or discounted cash flow. It can also be described as a “numbers game with many unknowns”. Numbers, data and facts are calculated on the basis of empirical values; nevertheless, the DCF remains a glimpse into the future, which can be discussed or even argued about.
Negative cash flow and the effects
A negative cash flow is when the expenses of a company are higher than the income within a defined accounting period. This is known as cash drain or cash loss, colloquially it is referred to as burning money. It means that the company cannot repay any loans from its current sales and cannot make any new investments. If the CF is negative in the long run, the company threatens bankruptcy unless measures to improve it are initiated beforehand, for example redundancies for operational reasons or restructuring of production for repayment.
