Cash Flow
UNDERSTANDING
Cash flow (cash flow) is "a number of cash coming out and as a result of corporate activity, in other words is the cash flow of the inflow in the company and cash flow out of the enterprise and how the balance of each period.
The main thing that should always be considered in managing the underlying cash flows is to understand clearly the functions of funds / money we have, we save or invest. In a simple function which is to be divided into three.
First, the function of liquidity, ie the available funds for the purpose of fulfilling their daily needs and may be withdrawn in a relatively short time without any reduction in initial investment.
Second, the function of anti-inflation, the funds held in order to avoid the risk of decline in purchasing power in the future that could be withdrawn relatively quickly.
Third, growth capital, the funds destined for the addition / development of property with a relatively long period of time.
Cash flow associated with a project can be divided into three groups:
a) Initial cash flow (Initial Cash Flow) is the cash flow associated with the
expenditure for investing activities for example; purchase of land, buildings,
etc. preliminary costs. Initial cash flow can be said of cash flow out (cash out
flow).
b) Operational cash flow (operational cash flow) is the cash flow associated with
the operation of such projects; sales, general expenses, and administration.
Therefore, the operational cash flow is cash flow (cash flow) and the flow of
cash out (cash out flow).
c) Final cash flow (Cash Flow Terminal) is a cash flow associated with the project
residual value (residual value) as the remaining working capital, the residual
value of the project that is the sale of project equipment.
LIMITATIONS
Cash flow has several limitations, among others;
a) The composition of revenues and expenditures are included in cash flow which is
cash only.
b) The Company is based only on targets that may be less flexible.
c) If there is a change in internal and external situation of the company that may
affect the estimation of incoming and outgoing cash flows that should be
considered, it will be hampered by the manager will only focus on cash budget ie
the less stable economic conditions, delays in fulfilling customer kewajibanya.
BENEFITS
As for usefulness in developing the company's estimated cash flow is very useful for some parties, especially Management. Among them:
1) Provide all plans related to cash receipts the company's financial plans and
transactions that led to changes in cash.
2) Some of the basis for assessing the funding needs for the future and estimate the
repayment period.
3) Helping menager for financial policy decisions.
4) To creditors can view the company's ability to repay loans granted him.
PREPARATION STEPS
There are four rare in the preparation of cash flow, namely:
1. Determining the minimum cash.
2. Prepare revenue and expenditure estimates.
3. Prepare estimates of debt funding requirements required to cover cash deficit and
pay back the loan from a third party.
4. Reconstructing the whole receipt and expenditure after the introduction of financial transactions, and cash budget is final.
Cash flow (cash flow) is "a number of cash coming out and as a result of corporate activity, in other words is the cash flow of the inflow in the company and cash flow out of the enterprise and how the balance of each period.
The main thing that should always be considered in managing the underlying cash flows is to understand clearly the functions of funds / money we have, we save or invest. In a simple function which is to be divided into three.
First, the function of liquidity, ie the available funds for the purpose of fulfilling their daily needs and may be withdrawn in a relatively short time without any reduction in initial investment.
Second, the function of anti-inflation, the funds held in order to avoid the risk of decline in purchasing power in the future that could be withdrawn relatively quickly.
Third, growth capital, the funds destined for the addition / development of property with a relatively long period of time.
Cash flow associated with a project can be divided into three groups:
a) Initial cash flow (Initial Cash Flow) is the cash flow associated with the
expenditure for investing activities for example; purchase of land, buildings,
etc. preliminary costs. Initial cash flow can be said of cash flow out (cash out
flow).
b) Operational cash flow (operational cash flow) is the cash flow associated with
the operation of such projects; sales, general expenses, and administration.
Therefore, the operational cash flow is cash flow (cash flow) and the flow of
cash out (cash out flow).
c) Final cash flow (Cash Flow Terminal) is a cash flow associated with the project
residual value (residual value) as the remaining working capital, the residual
value of the project that is the sale of project equipment.
LIMITATIONS
Cash flow has several limitations, among others;
a) The composition of revenues and expenditures are included in cash flow which is
cash only.
b) The Company is based only on targets that may be less flexible.
c) If there is a change in internal and external situation of the company that may
affect the estimation of incoming and outgoing cash flows that should be
considered, it will be hampered by the manager will only focus on cash budget ie
the less stable economic conditions, delays in fulfilling customer kewajibanya.
BENEFITS
As for usefulness in developing the company's estimated cash flow is very useful for some parties, especially Management. Among them:
1) Provide all plans related to cash receipts the company's financial plans and
transactions that led to changes in cash.
2) Some of the basis for assessing the funding needs for the future and estimate the
repayment period.
3) Helping menager for financial policy decisions.
4) To creditors can view the company's ability to repay loans granted him.
PREPARATION STEPS
There are four rare in the preparation of cash flow, namely:
1. Determining the minimum cash.
2. Prepare revenue and expenditure estimates.
3. Prepare estimates of debt funding requirements required to cover cash deficit and
pay back the loan from a third party.
4. Reconstructing the whole receipt and expenditure after the introduction of financial transactions, and cash budget is final.
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