Cashflow

The cash flow [ kæʃ fləʊ ] (English for cash flow, cash flow, German also " self-generated funds " ) is an economic measure. It represents the net inflow generated from operations and cash equivalents during a period dar. This measure allows us to assess the financial health of a company - how a company generate the necessary cash for maintain the assets in its balance sheet and make expansion investments as part of the sales process can.

• 2.1 Direct determination
• 2.2 Indirect determination

• 3.1 The indirect method

• 4.1 The indirect method
• 4.2 The direct determination method

• 5.1 Cash flow statement in the consolidated financial statements prepared
• 5.2 Cash flow statement in accordance with IAS / IFRS and U.S. GAAP

Definition and function

The cash flow is defined as a positive, periodisierter cash surplus of economic activity. This surplus or balance refers to income and expenses that are not only income, but also cash impact will therefore result in the same period for deposits or withdrawals.

The cash flow on the balance sheet analysis is adjusted for non-cash factors accounting success dar. You try the real cash flows reflect, for in the balance sheet profit of a company, a variety of factors such as depreciation and provisions are included that do not affect the real cash flow.

The cash flow figure is considered an important indicator of ability to pay and the internal financing potential of a company. Cash flow is a measure of liquidity and says something about a company's liquidity. A positive cash flow enables a company in a position to wipe out loans from the sales processes properly or to make new capital investment.

Negative cash flow

The outflow of cash flow from a company ( negative cash flow) is designated as a cash loss or cash drain [ kæʃ dreɪn ] referred colloquially as burning money, see cash burn rate.

Commercial Law

Numerous accounting rules, as well as the German Commercial Code ( HGB) have required the establishment of a cash flow statement and statement of cash flows as part of quarterly and annual financial statements of listed companies binding (corporations, partnerships limited by shares).

Determination

The cash value can be determined both directly and indirectly. Both methods have the same result if uniform detection and delineation criteria are applied.

Direct determination of

For direct determination of all be required for operations, cash expenses (eg cost of materials, wages / salaries, interest expense, taxes ) of a period of the cash income ( eg sales, income from investments, divestments, interest income, subsidies) subtracted. It should be noted that, of the revenue, the change in accounts receivable is subtracted each period end, because although the demands generate sales, but are non-cash. Payment due frequently is also called unit- effective, given the effects of the payments on cash and cash equivalents or funds. The data obtained from the profit and loss account (income statement ), if it is set up according to the cost method. For a presentation of the profit and loss account by the cost of sales is the direct determination of cash flow - at least for the external analysts - not executable.

Indirect determination

(Also called practitioner method) Indirect determination of accounting success, usually profit (net income ) is used after taxes. Output Neutral expenses ( which have no effect payment and billing items are only balance sheet ), such as depreciation or increase in provisions are added. Revenue neutral income, however, such attributions are subtracted. Output neutral and revenue neutral is also no effect on cash and frequently also called fund ineffective because do not affect these movements on cash and cash equivalents or funds.

Usually only the indirect cash flow determination is applicable for the external viewer (especially in the context of balance sheet analysis). For the indirect determination there is no generally accepted method. To avoid methods based misunderstandings, it is recommended to publish the entire bill. The German Association for Financial Analysis and Asset Management (DVFA ) and the Schmalenbach Society of Business Administration ( SG) also recommend a uniform calculation form.

Financial analysis of the company

The cash flow in the financial analysis of the company is as a financial indicator information as to

• Whether an entity may, under its own power investment and therefore in the future is competitive,
• What amount of cash for debt repayment, interest payments and for distribution to the shareholders are present and
• Extent to which risk of insolvency ( a continued negative cash flow leads to insolvency and thus to insolvency, see § 17 Insolvency Code ).

The indirect method

Result according to the profit and loss account

Depreciation / - Write-ups

Increase / - decrease in provisions

- Income / losses from disposal of assets

Traditional cash flow

/ - Decrease / increase in receivables, inventories, etc.

/ - Increase / decrease in trade payables etc.

1 Cash flow from operations ( operating cash flow)

Proceeds from disposals of assets

- Payments for capital investment

2 Cash flow from investing activities

Proceeds from transfers of equity

- Payments to owners

Proceeds from issue of financial liabilities

- Payments for repayment of financial liabilities

3 Cash flow from financing activities

Sum of items 1, 2, 3

Cash and cash equivalents at beginning of financial year

4 Cash and cash equivalents end of fiscal year

Economic Success Company Analysis

The cash flow is presented in the income economic analysis of the company as income indicator.

The indirect method

The cash flow in its simplest form (including gross cash flow and thus the entire from the company generated cash flow) is:

Since the cash flow can be used for debt repayment and reserve accumulation, further derived quantities must be determined in order to determine to what extent financial resources for investments and dividend payments are freely available. To calculate the net cash flow and free cash flow issue related expenses such as private withdrawals and investment are deducted from the balance sheet cash flow. Net cash proceeds that are made ​​the basis of accounting ( for example, divestitures), however, must be added. From the gross cash flow so following quantities can be derived:

• Net cash flow ( cash flow adjusted, inter alia, to tax payments, financing costs, reserve changes )

What taxes are deducted depends on the underlying assessment procedures. In Germany usually the discounted cash flow method ( DCF method ) is used. According to the IDW Standard S 1, both the business taxes and the personal income tax of the entrepreneur are considered in the DCF method.

• Free cash flow / free cash flow ( cash flow before dividends and ongoing investment )

Free cash flow is the free cash flow available. It shows how much money is left for the dividends of the shareholders and / or for paying back the debt financing. The extent of sustainable free cash flow is for financial institutions is an indicator of the ability to repay loans and is therefore often used as a basis for calculating the financing capacity.

The direct determination method

Gross sales

Population increase and semi- finished products

- Inventory reduction and semi- finished products

- Material costs for the period

- Personnel expenses for the period (net of pension provisions)

- External power expense for the period

- Other expenses of the period

- Voluntary contributions ( from the result )

CFBIT = (Cash Flow Before Interest and Taxes)

- Foreign interest

- Income taxes

= Net cash flow

- Increase in accounts receivable were

- Population increase raw materials and supplies

Stock purchase raw materials and supplies

Increase in current interest-free liabilities

Foreign interest

- Investments in fixed assets

Disposals of fixed assets

= Free Cash Flow

Cash flow statement in the financial statements

Using the cash flow statement is presented in the financial statements, the financial position of the company.

Statement of cash flows in the consolidated financial statements prepared

Group parent company must in accordance with § 297 paragraph 1 sentence 1 HGB publish a cash flow statement in its consolidated financial statements. The requirement to prepare a cash flow statement was not introduced until 1997 with the KonTraG for listed corporations and extended in 2002 to all corporations. Since the cash flow statement in the HGB is not explained in detail, (SFAS 95) was from the German Accounting Standards Committee of the DRS 2 " Cash Flow Statement " issued with rules for reporting and disclosure, which could materially to the respective IAS ( IAS 7) and U.S. GAAP are based.

All companies participating in the organized capital market in the EU are required to set up beginning after January 1, 2005 fiscal year consolidated financial statements according to IAS / IFRS and therefore also publish a cash flow statement under IAS 7.

Cash flow statement in accordance with IAS / IFRS and U.S. GAAP

The coined by the Anglo-Saxon "Statements of Cash Flows " understanding also involves as net free cash flow and the investing and financing activities of the company into consideration. The proposed cash flow statement, which is also the DRS 2 essentially follows is divided into three cash flows:

• Cash flow from operating activities (including operating cash flow ): after correction for short-term funding generated or consumed ( working capital, these include in particular stocks and short-term receivables)
• Cash flows from investing activities: after correction for cash outflow from capital expenditure and disposals
• Cash flows from financing activities: after correction for spent funds for dividends, interest payments and loan repayments as well as OBTAINED funds from capital and borrowings

For details of the scheme under IAS / IFRS see IAS 7