CFOs writing a progress report Money, are often faced with the fact that the calculated balance at the end of the period does not correspond to the data accounting. The reason is that important adjustments to the cash flow calculations were not made.

Calculation of net cash flow. Formula

Based balance sheet clean cash flow companies for the period (ΔD) can be calculated as follows:

ΔD = (ΔP - ΔTA + ΔTP) + (-ΔBOA) + (ΔSK + ΔZK),

Where ΔП- change in retained earnings (line 470 of the balance sheet);
ΔTA- change in current assets excluding cash (p. 290 - p. 260);
ΔTP- change in current liabilities (p. 690 - p. 610);
ΔBOA- change non-current assets(p. 190);
ΔCK- change in equity capital excluding retained earnings (line 490 - line 470);
ΔZK- change in borrowed capital (line 590 + line 610).

This is how a cash flow statement is prepared: indirect method, considering that: ΔP - ΔTA + ΔTP - cash flow from operating activities, and -ΔBOA and ΔSK + ΔZK - flows from investment and financial activities respectively. Actually this is not true.

After these amendments are determined, it is necessary to:

• break down adjustments into components (accrued but not paid interest, exchange rate differences on foreign currency loans, etc.). Here it will not be possible to do without an analysis of correspondence on accounting accounts;
• adjust operating cash flow for identified adjustments to investing and financing activities.

As a result formula for calculating net cash flow taking into account the adjustments it will look like this:

ΔD = (ΔP - ΔTA + ΔTP + IR1 + ... + IRn + FC1 + ... + FCn) + (-ΔBOA - IR1 - ... - IRn) + (ΔSK + ΔZK - FC1 - ... - FCn),

Where IR1...n- cash flow adjustments from investment activities;
FK1...n- adjustments to cash flow from financial activities.

Personal experience

Oleg Moseev, financial director of the AutoSpetsCenter Group of Companies

In our company, the cash flow statement using the indirect method is prepared using a similar method. The advantage of this form of reporting is the visibility of the transition from the profit earned by the company for the period to cash flow. After I initiated the preparation of this report four years ago, the question of why changes in account balances did not coincide with net profit figures went away by itself.

Calculation of cash flows. Example

Table 3. Cash flow statement for December 2009, constructed by the indirect method

No.	Index	Sum, thousand roubles.
1	Opening balance	4505
2	Net profit	2342
3	Depreciation	1141
4	Movement of accounts receivable debt	-18 145
5	Movement of creditors debt	161
6		-931
7	Stock movement	2386
8	Transitions between accounting items for non-current and current assets	47
9	Movement of VAT for reimbursement/payment	0
10	Accrued but unpaid expenses on credits, borrowings	15
11	Operating Cash Flow (sum of lines from 2nd to 10th)	-12 984
12	Change in non-current assets	-145
13	Depreciation	-1141
14	Adjustment of the movement of receivables and payables on fixed assets	931
15	Transitions between accounting items non-current and current assets	-47
16	Investment cash flow (sum of lines 12 to 15)	-402
17	Change in capital (equity and debt)	14 542
18	Accrued but unpaid expenses on loans and borrowings	-15
19	Financial cash flow (sum of lines 17 to 18)	14 527
20	Outgoing balance (page 1 + + page 11 + page 16 + page 19)	5646

The following group of transactions for the agricultural enterprise “Zapad” reflects the calculation of depreciation:

• Dt 20 “Main production” - Kt 02 “Depreciation of fixed assets” -
• 841 thousand rubles;
• Dt 25 “General production expenses” - Kt 02 “Depreciation of fixed assets” - 298 thousand rubles;
• Dt 26 " General running costs» - Kt 02 “Depreciation of fixed assets” - 2 thousand rubles.

Useful article? Bookmark this page, save it, print it, or forward it.

Hence, the adjustment of investment cash flow for depreciation will be 1141 thousand rubles. (841 thousand rubles + 298 thousand rubles + 2 thousand rubles).

In December, the enterprise took into account equipment worth 94 thousand rubles and attributed to the cost of non-current assets the costs of carrying out construction work for 1235 thousand rubles, as well as costs associated with payment for services contractors carried out through accountable persons (4 thousand rubles). These business transactions(total amount 1333 thousand rubles) are reflected in the following entries:

• Dt 07 “Equipment for installation” - Kt 60 “Settlements with suppliers and contractors” - 94 thousand rubles;
• Dt 08.3 “Investments in non-current assets” - Kt 60 “Settlements with suppliers and contractors” - 1235 thousand rubles;
• Dt 08.3 “Investments in non-current assets” - Kt 71 “Settlements with accountable persons” - 4 thousand rubles.

We’ll talk about what adjustments related to these operations will have to be made a little later. So, the operations listed above relate to investment activities, but the list is not limited to them. After all, “cash” accounts 50 “Cash” and 51 “Current Account” can reflect transactions related to the same type of activity. In our example, this is payment to contractors for work performed (398 thousand rubles) and the issuance of funds for reporting (4 thousand rubles) - a total of 402 thousand rubles:

• Dt 60 “Settlements with suppliers and contractors” - Kt 51 “ Current accounts" - 398 thousand rubles;
• Dt 71 “Settlements with accountable persons” - Kt 50.1 “Cash of the organization in rubles” - 4 thousand rubles.

So, all the necessary wiring adjustments have been found. Before you start calculating investment flow, we will exclude “transit” money (we will collapse the postings to the same accounts).
We reason like this: if the debit of the accounts for non-current assets corresponds with the credit of some account X, and the credit of accounts 50 and 51 corresponds with the debit of the same account X for the same amount, this means that the money, having migrated in transit through account X, turned into fixed assets .

This "pass-through" money should be excluded from the calculations since it does not affect cash flow. Of much greater interest are the money remaining on the debit or credit of account X. It is they that lead to the difference between the investment cash flow and the change in the value of fixed assets on the balance sheet.

In the example, such “transit” accounts are account 60 “Settlements with suppliers and contractors” and 71 “Settlements with accountable persons”. The procedure for reversing entries is that we clear the credit of these accounts from transit money and we get the value of 931 thousand rubles. (94 thousand rubles (Dt 07 - Kt 60) + 1235 thousand rubles (Dt 08.03 - Kt 60) + 4 thousand rubles (Dt 08.03 - Kt 71) - 398 thousand rubles (Dt 60 - Kt 51) - 4 thousand rubles (Dt 71 - Kt 50.1)). The resulting figure is nothing more than an adjustment to the movement of receivables and payables. In my own way economic sense it means that the acquisition of fixed assets was carried out by increasing accounts payable or reducing accounts receivable. Therefore, this adjustment is taken into account with a minus sign in the calculation of investment flow.

So, as a result of the analysis of the postings, it was found that:

• the value of non-current assets on the balance sheet increased by 145 thousand rubles;
• depreciation was accrued for 1141 thousand rubles;
• accounts payable (or receivable) changed by 931 thousand rubles due to investments in fixed assets;
• the difference between writing off and crediting funds to the accounts of non-current and current assets amounted to 47 thousand rubles.

Now it is easy to calculate net investment cash flow using the indirect method (see Table 3). It will be -402 thousand rubles. (-145 thousand rubles - 1141 thousand rubles - (- 931 thousand rubles) - 47 thousand rubles). The resulting amount is exactly the same as the investment cash flow from the direct method cash flow statement. This means that all adjustments are determined correctly.

Step 2: Determine financial cash flow adjustments

Financial cash flow is calculated according to the same logic as investment cash flow. We analyze correspondence on accounts that account for our own and borrowed capital(67 “Calculations for long-term loans and borrowings”, 80 “ Authorized capital"), entries to account 51 related to financial activities, and finally, we calculate the necessary adjustments. The following entries were made in Zapad LLC for the listed accounts:

• Dt 91.2 “Other expenses” - Kt 67.2 “Interest on long-term loans in rubles” - 1201 thousand rubles. (accrued interest on the loan);
• Dt 67.2 “Interest on long-term loans in rubles” - Kt 51 “Current accounts” - 1186 thousand rubles. (interest paid on the loan).

As you can see, for reporting period Interest accrued on bank loans was 15 thousand rubles more than actually paid. The reason for this discrepancy is that interest payments are due on the 20th of every month. In this case, interest accrued for the remaining days of the month will be paid in the next period. The identified difference between accrued and paid interest explains the difference between the change in the value of equity and borrowed capital from the enterprise’s balance sheet and the financial cash flow from the cash flow statement compiled in a direct way.

It turns out that in December 2009 the company's equity and borrowed capital increased by 14,542 thousand rubles. (ΔSK + ΔZK, 0 thousand rubles + (-1284 thousand rubles) + 15,826 thousand rubles). At the same time, accrued but unpaid interest on loans and borrowings amounted to 15 thousand rubles. Hence the financial cash flow, calculated indirectly, is equal to 14,527 thousand rubles. (14,542 thousand rubles - 15 thousand rubles) (see Table 3).

Step 3. Calculate operating cash flow

Operating cash flow is calculated as the sum of changes in retained earnings, current assets and balance sheet liabilities, and adjustments determined in the previous steps. According to the balance sheet of Zapad LLC for December 2009 (see Table 1) retained earnings increased by 2342 thousand rubles. Inventories decreased by 2,386 thousand rubles, and accounts receivable increased by 18,145 thousand rubles. Also, during the reporting period, accounts payable increased by 161 thousand rubles. Accordingly, the operating cash flow determined by the indirect method is, as a first approximation, equal to -13,256 thousand rubles. (RUB 2,342 thousand - (RUB 2,386 thousand + RUB 18,145 thousand) + RUB 161 thousand). And taking into account the previously determined adjustments, it will be -12,984 thousand rubles. (-13,256 thousand rubles + 1141 thousand rubles - 931 thousand rubles + 47 thousand rubles + 15 thousand rubles) (see Table 3).

As can be seen from the obtained result, despite the fact that in the analyzed period the enterprise’s profit is positive, the operating cash flow is negative. That is, the traditional question arises: if there is profit, then where is the money? The reason for this situation is a significant increase in accounts receivable by 18,145 thousand rubles.

If we look at it in more detail, the increase in accounts receivable is quite justified. It is caused by the need to pay an advance for grain supplies in the amount of annual demand - the enterprise has provided itself with a guaranteed supply of feed until the next harvest and no longer depends on fluctuations in grain prices. The main source of financing for the increase in accounts receivable was the financial activity of the enterprise - the advance payment was made by attracting short-term bank loan. Thus, a negative operating flow cannot be considered a negative characteristic of the enterprise.

Personal opinion

Elena Denisova, financial director of Chateau le Grand Vostok

For small companies, the cash flow statement using the indirect method is the main report for working with investors, since it is the one that answers main question: How efficiently a business generates cash. The effectiveness of this process is most easily calculated using variation analysis, that is, by calculating the deviations actual values by main cash flow items from planned indicators. If the fact is below the plan, the financier or accountant collects the variances for each line, thus estimating the contribution of each type of income or expense to the final variance of the cash flow statement with the plan.

What is FCF

According to the definition of FCF (Free Cash Flow) represents the cash over a given period that a company has available after investing to maintain or expand its asset base (Capex). This is a dimension financial indicators and the health of the company.

There are two types of free cash flow: free cash flow to the firm (FCFF) and free cash flow to shareholders (FCFE).

Free cash flow (FCF) is the cash flow available to all investors in a company, including shareholders and creditors.

This indicator is not standardized accounting indicator, i.e. you won't be able to find it in the company's reporting. Company management can calculate FCF separately and uses it for clarity financial situation companies. Most often, the calculated FCF can be found in a company presentation, press release, or management's analysis of the company's financial condition and results of operations (MD&A).

There are 3 main methods for calculating FCF

The choice of calculation method depends on how deeply you want to analyze the company’s cash flows and on what data the indicator is calculated (historical or forecast).

1 way- the simplest, designed for the initial assessment of the company’s cash flows based on actual data:

FCF = Net cash flows provided by operating activities - capital expenditures (Capex).

That is, from the money received during the period from core activities, we subtract capital costs for maintaining or expanding production.

Let's calculate free cash flow for the first quarter of 2018 using the example of Severstal.

We can take all the calculation values ​​from the company's cash flow statement.

We can find capital expenditures in the investment activity report. IN in this case they consist of two articles - Acquisition of fixed assets + acquisition intangible assets.

(The figure corresponding to the line in the reporting above is signed in brackets).

Method 2- more complex, which reveals in more detail the reasons for changes in free cash flow:

FCF = EBITDA - income tax paid - capital costs (Capex) - changes in working capital (NWC, Net working capital change)

That is, we clear the “dirty indicator” of cash flow (EBITDA) from taxes and changes in working capital. Please note that the calculation takes into account the actual income taxes paid, which are reflected in the company’s cash flow statement. This is due to the fact that FCF shows the real money that remains in the company, while paid and paper taxes may diverge several times.

In terms of change in working capital, a company must maintain net current assets each period to carry on its operating activities. If it wants to increase revenue, it will be forced to increase working capital, which in turn requires raising additional cash from operating flow to purchase additional assets.

The change in working capital is also taken from the statement of cash flows, however, companies do not always report it there. Then we can calculate NWC change independently from the company’s balance sheet, by calculating changes in current assets and liabilities relative to the previous period.

Calculation of FCF in the second way for the Severstal company:

The result was greater than in the first case. Don't forget that EBITDA may contain non-cash items for which free cash flow must be adjusted.

3 way similar to the second method, but used for forecasting purposes:

FCF = EBIT*(1-tax) + depreciation - capital costs - changes in working capital

This method differs from the previous one solely by taking into account taxes. Since it is used for forecasting purposes, we do not know what taxes actually paid will be. Then the method uses the effective average tax rate(tax), calculated on historical data.

The listed formulas are basic formulas in the classical sense. In practice, the FCF calculation is adjusted for non-recurring or non-cash items. Examples include deductions related to income Pension Fund companies, or the purchase of other businesses (this is not part of capital expenditures).

Thus, for each company it is necessary to modernize the standard formulas to take into account all aspects related to the company, as well as country or industry characteristics.

In the presentation of the Severstal company you can find a detailed calculation of the FCF indicator:

Company management deviates from the classic formula and deducts interest paid, as well as other adjustments. Thus, in theoretical understanding it's more like FCFE, which we'll talk about next.

Why do we need FCF?

Now let's figure out why everyone needs this FCF indicator so much and why most Western companies tie dividend payments to it.

Free cash flow reflects the amount of money a company earns from operating activities. Unlike profit, FCF shows how much a company can generate cash flows (excludes paper income), which can be used for the following purposes:

1. Payment of dividends

2. Buyback of shares from the exchange (Buyback)

3. Paying off debt

4. M&A transactions, purchase of non-core assets

5. Saving money on your balance sheet

Let us recall that one of the methods for estimating fair value company is a DCF model (discounted future cash flows of the company). That is, FCF and its dynamics determine market value shares of a company, since the greater the cash flows, the more reasons investors have to expect larger dividends (there are exceptions).

However, many companies stick to the latter option because they are afraid that if they start increasing dividend payments, they will soon face liquidity problems.

Do not think that FCF is a Western indicator that is not suitable for Russian realities. It is conceptual and its meaning is not lost under any circumstances. However, if the company reports only according to RAS, it will be much more difficult to calculate it.

FCFE (Free cash flow to equity) indicator

FCFE is a type of free cash flow that shows how much of the FCF goes to shareholders. This value is a rather conditional estimate, since shareholders receive only dividends.

The main difference between FCFF and FCFE is that the lender's portion of the money is deducted from the FCFF. Formula this indicator as follows:

FCFE = FCF - interest paid - (debt repaid for the period - debt issued for the period)

That is, if a company has increased debt over a period, then it has increased free cash flow, which shareholders can dispose of. The FCFE indicator shows the amount of money for a period that shareholders can use for their needs (payment of dividends, buyback) without harming the company's operating activities.

We can also find the interest paid in the cash flow statement. The change in debt is either in the financial activity section of the general income tax balance, or is reflected as a change in total debt from the company’s balance sheet to the previous period.

For the Severstal company, the FCFE indicator is equal to:

However, free cash flow attributable to shareholders has its drawbacks:

1. FCFE is much more volatile over time, and therefore less predictable in financial modeling.

2. The change in debt over the period has a great influence on the FCFE indicator. The problem is that most often a company cannot use debt for any purpose (except credit lines). Typically, there are strict conditions that limit company management from using raised money, for example, to pay dividends. Otherwise, creditors have veto power.

Although the FCFE indicator is more theoretical, it is also useful as FCFF for analyzing the financial performance of a company.

Optimization of financial, production and investment processes is unthinkable without quality analysis. Based on data from studies and reports, the planning process is carried out, and unfavorable factors hindering development are eliminated.

One of the types of assessing the effectiveness of financial activities is the calculation cash flow. Formula and the features of the application of this technique will be presented below.

Purpose of analysis

Cash flow formula calculated in accordance with certain methods. The purpose of such an analysis is to determine the sources of cash flow to the organization, as well as their expenditure in order to calculate the deficit or surplus of money for the period under study.

To carry out such a study, the company prepares a cash flow statement. An appropriate estimate is also drawn up. With the help of such documents, it is possible to determine whether the existing funds available are sufficient to organize full-fledged investment and financial activities of the company.

The conducted research allows us to determine whether the organization is dependent on external sources of capital. The dynamics of inflow and outflow of funds in the context of each type of activity is also analyzed. This allows you to develop a dividend policy and predict it in the future. Cash flow analysis aims to determine the actual solvency of the organization, as well as its forecast in the short term.

What does the calculation give?

Cash flow, calculation formula which is presented in various methods, requires proper analysis for effective management. In the case of conducting the presented research, the organization has the opportunity to maintain a balance of its financial resources in the current and planned period.

Cash flows must be synchronized in their arrival time and volume. Thanks to this you can achieve good performance development of the company, its financial stability. A high degree of synchronization of input and output flows allows you to speed up the execution of tasks in a strategic perspective and reduce the need for paid (credit) sources of financing.

Managing financial flows allows you to optimize the consumption of financial resources. The level of risk in this case is reduced. Effective management will help avoid company insolvency and increase financial stability.

Classification

There are 8 main criteria by which cash flows can be grouped into categories. Taking into account the methodology by which the calculation was made, a distinction is made between gross and for the first approach it involves summing up all the cash flows of the enterprise. The second method takes into account the difference between income and expenses.

Based on the scale of influence on the economic activity of an organization, a distinction is made between the overall flow for the company, as well as its components (for each division and economic operations).

By type of activity there are distinguished production (operational), financial and investment group. Based on the direction of movement, a distinction is made between positive (incoming) and negative (outgoing) flow.

When considering the sufficiency of funds, a distinction is made between surplus and deficit of funds. The calculation can be made in the current or planned period. Flows can also be classified into discrete (one-time) and regular groups. Capital can flow in and out of an organization at regular intervals or randomly.

Clean flow

One of the key indicators in the presented analysis is Net cash flow. Formula this coefficient is applied when investment analysis activities. It gives the researcher information about the financial condition of the company, its ability to increase its market value, and attractiveness to investors.

Net cash flow is calculated as the difference between the finances received and those leaving the organization for a selected period of time. This is actually the sum between financial, operating and investing indicators.

Information about the size and nature of this indicator is used by the owners of the organization, investors and credit companies when making strategic decisions. At the same time, it becomes possible to calculate whether it is advisable to invest in the activities of a specific enterprise or in a prepared project. The presented coefficient is taken into account when calculating the value of the enterprise.

Thread management

Cash flow ratio, formula which is used in calculations by almost everyone large organizations, allows you to effectively manage financial flows. For calculations, you will need to determine the amount of incoming and outgoing funds for a specified period, their main components. The breakdown is also carried out in accordance with the type of activity that generates a certain capital flow.

Calculation of indicators can be done in two ways. They are called the indirect and direct method. In the second case, the organization’s account data is taken into account. The fundamental component for conducting such a study is the sales revenue indicator.

The indirect calculation method involves using the balance sheet items, as well as the income and expense statement of the enterprise, for analysis. For analysts, this method is more informative. It will allow you to determine the relationship between profit in the period under study and the amount of money of the enterprise. The impact of changes in balance sheet assets on the net profit indicator can also be considered when using the presented methodology.

Direct calculation

If the calculation is made at a specific moment it is determined current cash flow. Formula its quite simple:

NPV = NPV + NPF + NPI, where NPV is the net cash flow in the period under study, NPV is the flow from operating activities, NPF is from financial transactions, NPV is in the context of investment activities.

To determine net cash flow, you must use the formula:

NPV = VDP - IDP, where VDP is the incoming flow of money, IDP is the outgoing flow of funds.

In this case, the calculation is made for one or several billing periods. This simple formula. The components from each type of activity must be calculated separately. In this case, it is necessary to take into account all the components.

Calculation of net investment flow

The bulk of the organization's funds at the disposal of the company in this moment, comes from operating cash flow. Formula the calculation of the net indicator (presented above) necessarily takes this value into account.

NPI = BOS + PNA + PDF + RA + DP - POS + ONP - PNA - PDF - VSA, where BOS is revenue received from the use of fixed assets, PNA is income from the sale of intangible assets, PDF is income from the sale of long-term assets financial assets, RA - income for the sale of shares, DP - interest and dividends, POS - acquired fixed assets, ONP - balance of work in progress, PNA - purchase of intangible assets, PDF - purchase of long-term financial assets, VSA - the amount of purchased own shares.

Calculation of net financial flow

Cash flow formula applies data on the net calculation is made using the following formula:

NPF = DVF + DDKR + DKKR + BCF - VDKD - VKKD - YES, where DVF is additional external financing, DDKR - additionally attracted long-term loans, DKKR - additionally attracted short-term loans, BCF - irrevocable targeted financing, VDKD - debt payments on long-term loans, VKKD - payments on short-term loans, YES - dividend payments to shareholders.

Indirect method

Indirect also allows you to determine pure cash flow. Balance formula involves making adjustments. For this purpose, data on depreciation, changes in the structure and quantity of current liabilities and assets are used.

Net profit from operating activities is calculated using the following formula:

ChPO = state of emergency + AOS + ANA - DZ - Z - KZ + RF, where state of emergency - net profit enterprises, AOS - depreciation of fixed assets, ANA - depreciation of intangible assets, DZ - change in accounts receivable in the period under study, Z - change in inventories, KZ - change in the amount of accounts payable, RF - change in the reserve capital indicator.

Net cash flow is directly affected by changes in the value of the company's current liabilities and assets.

Free Cash Flow

Some analysts use the indicator in the process of studying the financial condition of an organization free cash flow. Formula The calculation of the presented indicator is considered in two main aspects. A distinction is made between free cash flow of the firm and capital.

In the first case, the company's operating performance indicator is considered. Investments in fixed assets are subtracted from it. This indicator provides information to the analyst about the amount of finance that remains at the company's disposal after investing capital in assets. The presented methodology is used by investors to determine the feasibility of financing the company's activities.

Free cash flow of capital involves subtracting only the company's own investments from the total finances of the enterprise. This calculation is most often used by the company's shareholders. This technique is used in the process of assessing the shareholder value of an organization.

Discounting

To compare future financial payments with the current state of value, the discounting technique is used. This technique takes into account that in the future money gradually loses its value relative to current state prices. Therefore, the analysis uses discounted cash flow. Formula it also contains a special coefficient. It is multiplied by the amount of financial flow. This allows us to compare the calculation with the current level of inflation.

The discount factor is determined by the formula:

K = 1/(1 + SD)VP, where SD is the discount rate, VP is the time period.

The discount rate is one of the most important elements in the calculation. It characterizes what income an investor will receive when investing their funds in a specific project. This indicator contains information about inflation, profitability in terms of risk-free operations, and profit from increased risk. The calculations also take into account the refinancing rate, the cost (weighted average) of capital, and deposit interest.

Optimization approaches

When determining the financial condition of an organization, they take into account discounted cash flow. Formula may not be taken into account if the indicator is given in the short term.

The process of optimizing cash flow involves establishing a balance between the company's expenses and income. Deficiency and excess negatively affect financial condition and stability of the organization.

When a cash shortage occurs, liquidity indicators decrease. Solvency also becomes low. Excess funds entail the actual depreciation of temporarily idle funds due to inflation. Therefore, the company's management must balance the amount of incoming and outgoing flows.

Having considered what it is cash flow formula its definition, decisions can be made on optimizing this indicator.

Analyze potential effectiveness investment projects and the financial and economic activities of a company or enterprise can be done by studying information about the movement of money in them. It is important to understand the structure of cash flows, their magnitude and direction, and distribution over time. In order to conduct such an analysis, you need to know how to calculate cash flow.

Before risking his money and deciding to invest in any venture that involves making a profit, a businessman must know what kind of cash flows it is capable of generating. The business plan must contain information about expected costs and revenues.

The analysis usually consists of two stages:

• calculation of what is needed to implement the initiative capital investments and forecasting cash flows (cash flow) that the project will generate;
• determination of net present value, which is the difference between cash inflows and outflows.

Most often, investment (outflow) occurs at the initial stage of the project and during a short initial period, after which the influx of funds begins. To organize a clearly managed structure, cash flow is calculated as follows:

• in the first year of implementation - monthly;
• in the second year - quarterly;
• in the third and subsequent years - based on the results of the year.

Experts often consider cash flow as standard and non-standard:

• In the standard, all costs are first incurred, after which revenues from the enterprise’s activities begin;
• In non-standard, negative and positive indicators can alternate. As an example, we can take an enterprise, after the end of its life cycle, according to legal norms, it is necessary to carry out a number of environmental measures (reclamation of land after the completion of mining from a quarry, etc.).

Depending on the type economic activity Companies distinguish three main types of cash flow:

• Operating(basic). It is directly related to the operation of the enterprise. In it, the main activity of the company (sales of services and goods) acts as an influx of funds, while the outflow occurs mainly to suppliers of raw materials, equipment, components, energy, semi-finished products, that is, everything without which the activity of the enterprise is impossible.
• Investment. It is based on transactions with long-term assets and profit from previous investments. The inflow here is the receipt of interest or dividends, and the outflow is the purchase of shares and bonds with the prospect of receiving a profit later, the acquisition of intangible assets (copyrights, licenses, rights to use land resources).
• Financial. Characterizes the activities of owners and management to increase the capital of the company to solve the problems of its development. Inflow – proceeds from sales valuable papers and obtaining long-term or short-term loans, outflow - money to repay loans taken, payment to shareholders of dividends due to them.

In order to correctly calculate a company’s cash flow, it is necessary to take into account all possible factors influencing it, in particular, do not forget about the dynamics of changes in the value of money over time, i.e. discount. Moreover, if the project is short-term (several weeks or months), then bringing future income to the current moment can be neglected. When it comes to starting with life cycle more than a year, then discounting is the main condition of the analysis.

Determining the amount of cash flow

The key indicator by which the prospects of the initiative proposed for consideration are calculated is the current cost, or (English Net Cash Flow, NCF). This is the difference between positive and negative flows over a certain period of time. The calculation formula looks like this:

• CI – incoming flow with a positive sign (Cash Inflow);
• CO – outgoing flow with a negative sign (Cash Outflow);
• n – number of inflows and outflows.

If we are talking about the total indicator of a company, then it is necessary to consider its cash flow as the sum of three main types of cash receipts: main, financial and investment. In this case, the formula can be depicted as follows:

it shows the financial flows:

• CFO – operational;
• CFF – financial;
• CFI – investment.

The current value can be calculated using two methods: direct and indirect:

• The direct method is adopted for intra-company budget planning. It is based on revenue from sales of goods. Its formula also takes into account other income and expenses for operating activities, taxes, etc. The disadvantage of the method is that it cannot be used to see the relationship between changes in the volume of funds with the profit received.
• The indirect method is preferable because it allows you to analyze the situation more deeply. It makes it possible to adjust the indicator taking into account transactions that are not of a monetary nature. Moreover, it may indicate that the current value of a successful enterprise may be either more or less than the profit for a certain period. For example, purchasing additional equipment reduces the cash flow relative to the profit margin, while obtaining a loan, on the contrary, increases it.

The difference between profit and cash flow consists of the following nuances:

• profit shows the amount of net income for a quarter, year or month, this indicator is not always similar to Cash Flow;
• when calculating profits, some operations taken into account when calculating cash movements (repayment of loans, receipt of grants, investments or loans) are not taken into account;
• individual costs are accrued and affect profit, but do not cause actual cash expenses (expected expenses, depreciation).

The cash flow indicator is used by business representatives to assess the effectiveness of an undertaking. If the NCF is above zero, then it will be accepted by investors as profitable; if it is equal to zero or below it, it will be rejected as one that cannot increase value. If you need to make a choice from two similar projects, preference is given to the one with more NFC.

Examples of cash flow calculations

Let's consider an example of calculating the cash flow of an enterprise for one calendar month. The initial data is distributed by type of activity.

Main:

• proceeds from product sales – 450 thousand rubles;
• expenses for materials and raw materials – (-) 120 thousand;
• employee salaries – (-) 45 thousand;
• total expenses – (-) 7 thousand;
• taxes and fees – (-) 36 thousand;
• loan payments (interest) – (-) 9 thousand;
• increase in working capital – (-) 5 thousand.

Total for core activities – 228 thousand rubles.

Investment:

• investments in land plot– (-) 160 thousand;
• investments in assets (purchase of equipment) – (-) 50 thousand;
• investments in intangible assets (license) – (-) 12 thousand.

Total for investment activities – (-) 222 thousand rubles.

Financial:

• obtaining a short-term bank loan – 100 thousand;
• repayment of a previously taken loan – (-) 50 thousand;
• payments for leasing equipment – ​​(-) 15 thousand;
• dividend payments – (-) 20 thousand.

Total for financial activities – 15 thousand rubles.

Therefore, using the formula we obtain the required result:

NCF = 228 – 222 + 15 = 21 thousand rubles.

Our example shows that the monthly cash flow has a positive value, which means that the project has a certain positive effect, although not very large. In this case, you need to pay attention to the fact that in this month the loan was repaid, payment for the land plot was made, equipment was purchased, and dividends were paid to shareholders. In order to avoid problems with paying bills and gain profit, I had to take out a short-term loan from the bank.

Let's look at another example of calculating Net Cash Flow. Here, all the company’s flows are taken into account as inflows and outflows of money without breaking down into types of activities.

Receipts (in thousand rubles):

• from the sale of goods – 300;
• interest on previously made investments – 25;
• other income – 8;
• from the sale of property – 14;
• bank loan – 200.

Total receipts – 547 thousand rubles.

Costs (in thousand rubles):

• for payment for services, goods, works – 110;
• on wages – 60;
• for fees and taxes – 40;
• for payment of bank interest on a loan - 11;
• for the acquisition of intangible assets and fixed assets – 50;
• for loan repayment – ​​100.

Total costs – 371 thousand rubles.

Thus, we end up with:

NCF = 547 – 371 = 176 thousand rubles.

However, our second example is evidence of a rather superficial approach to financial analysis state of the enterprise. Accounting should always be carried out by type of activity, based on data from management and analytical accounting, order journals, general ledger.

Experienced financiers and managers advise: in order to clearly control the flow of funds, enterprise management should constantly monitor the influx of funds from operating activities, studying the sales schedule broken down by client and by each type of product.

Of the many expense items, you can identify 5-7 of the most expensive ones and track them online. It is not advisable to detail the report on cost items too much, since dynamically changing small quantities are difficult to analyze and can lead to incorrect results. In addition, there are problems with regularly updating information for each item and comparing them with accounting data.

The company's profit, which is shown in the income statement, should in theory be an indicator of the effectiveness of its work. However, in reality, net profit is only partially related to the money a company makes in real terms. How much money a business actually makes can be found out from the cash flow statement.

The fact is that net profit does not fully reflect the money received in real terms. Some of the items in the profit and loss statement are purely “paper”, for example, depreciation, revaluation of assets due to exchange rate differences, and do not bring real money. In addition, the company spends part of its profits on maintaining its current activities and for development (capital costs) - for example, the construction of new workshops and factories. Sometimes these costs can even exceed the net profit. Therefore, a company may be profitable on paper, but in reality suffer losses. Cash flow helps assess how much money a company actually makes. A company's cash flows are reported on the cash flow statement.

Company cash flows

There are three types of cash flows:

• from operating activities - shows how much money the company received from its core activities
• from investment activities - shows the movement of funds aimed at developing and maintaining current activities
• from financial activities - shows cash flow by financial transactions: raising and paying off debts, paying dividends, issuing or repurchasing shares

The summation of all three items gives net cash flow - Net Cash Flow. It is reported in the report as Net increase/decrease in cash and cash equivalents. Net cash flow can be either positive or negative (negative is indicated in parentheses). It can be used to judge whether the company is making money or losing it.

Now let's talk about what cash flows are used to value a company.

There are two main approaches to business valuation - from the point of view of the value of the entire company, taking into account both equity and debt capital, and taking into account the value of only equity capital.

In the first case, cash flows generated by all sources of capital—own and borrowed—are discounted, and the discount rate is taken as the cost of attracting total capital (WACC). The cash flow generated by all capital is called the firm's free cash flow FCFF.

In the second case, the value of not the entire company is calculated, but only its equity capital. To do this, discount free cash flow by equity FCFE - after debt payments have been made.

FCFE - free cash flow to equity

FCFE is the amount of money left over from earnings after taxes, debt payments, and expenses to maintain and develop the company's operations. The calculation of free cash flow to FCFE's equity begins with the company's net income (Net Income), the value is taken from the income statement.

Depreciation, depletion and amortization from the income statement or cash flow statement is added to it, since in fact this expense exists only on paper, and in reality the money is not paid.

Next, capital expenditures are deducted - these are expenses for maintaining current activities, modernization and acquisition of equipment, construction of new facilities, etc. CAPEX is taken from the investment activity report.

The company invests something in short-term assets - for this, the change in the amount is calculated working capital(Net working capital). If working capital increases, cash flow decreases. Working capital is defined as the difference between current (current) assets and short-term (current) liabilities. In this case, it is necessary to use non-cash working capital, that is, adjust the value of current assets by the amount of cash and cash equivalents.

For a more conservative estimate, non-cash working capital is calculated as (Inventory + Accounts Receivable - Accounts payable last year) - (Inventory + Accounts Receivable - Accounts Payable previous year), the figures are taken from the balance sheet.

In addition to paying off old debts, the company attracts new ones, this also affects the amount of cash flow, so it is necessary to calculate the difference between payments on old debts and obtaining new loans (net borrowings), the figures are taken from the statement of financial activities.

The general formula for calculating free cash flow to equity is:

FCFE = Net income + Depreciation - Capital expenditures +/- Change in working capital - Repayment of loans + Obtaining new loans

However, depreciation is not the only “paper” expense that reduces profit; there may be others. Therefore, a different formula can be used using cash flow from operations, which already includes net income, adjustment for non-cash transactions (including depreciation), and changes in working capital.

FCFE = Net Cash Flow from Operating Activities - Capital Expenditures - Loan Repayments + New Borrowings

FCFF is the firm's free cash flow.

A firm's free cash flow is the cash remaining after paying taxes and capital expenditures, but before subtracting interest and debt payments. To calculate FCFF, operating profit (EBIT) is taken and taxes and capital expenditures are subtracted from it, as is done when calculating FCFE.

FCFF = After Tax Operating Profit (NOPAT) + Depreciation - Capital Expenditure +/- Change in Working Capital

Or here's a simpler formula:

FCFF = Net Cash Flow from Operating Activities – Capital Expenditures

FCFF for Lukoil will be equal to 15568-14545=1023.

Cash flows can be negative if the company is unprofitable or capital expenditures exceed profits. The main difference between these values ​​is that FCFF is calculated before the payment/receipt of debts, and FCFE after.

Owner's earnings

Warren Buffett uses what he calls owner's earnings as cash flow. He wrote about this in his 1986 address to Berkshire Hathaway shareholders. Owner's profit is calculated as net profit plus depreciation and amortization and other non-cash transactions minus average annual amount capital expenditures on fixed assets that are required to maintain long-term competitive position and volumes. (If a business requires additional working capital to maintain its competitive position and volume, its increase should also be included in capital expenditures).

Owner's profit is considered to be the most conservative method of estimating cash flow.

Owner's Earnings = Net Income + Depreciation and Amortization + Other Non-Cash Transactions - Capital Expenditures (+/- Additional Working Capital)

In essence, free cash flow is the money that can be completely painlessly withdrawn from a business without fear that it will lose its position in the market.

If we compare all three parameters of Lukoil over the past 4 years, their dynamics will look like this. As can be seen from the graph, all three indicators are falling.

Cash flow is the money that remains with the company after all necessary expenses. Their analysis allows us to understand how much the company actually earns, and how much cash it actually has left for free disposal. DP can be both positive and negative if the company spends more than it earns (for example, it has a large investment program). However, a negative DP does not necessarily indicate a bad situation. Current large capital expenditures may return many times greater profits in the future. A positive DP indicates the profitability of the business and its investment attractiveness.