Cash Flow

INTRODUCTION 3

1. OBJECTIVES 4

1.1. General objective 4

1.2. Specific Objectives 4

2. CASH FLOW PROJECT 5

2.1. Cash Flow 5

2.2. IMPORTANCE OF CASH-FLOW 6

2.3. CASH FLOW RANGE 6

4.4. THE CASH FLOW MOMENTS 7

4.5. Main Rules on Project Cash Flow 9

4.5.1. Cash flow must be net of taxes 9

4.6. Project Cash Flow Prospects 10

4.6.1. Cash flow to equity (CFE) 11

4.6.2. Free cash flow to the firm (FCF) 12

4.7. Dimension of project cash flow 12

4.8. Cash flow projection component 12

5. PRACTICAL CASE 16

5.1. The case of Toyota of Moçambique 16

6. PROJECT CASH FLOW ESTIMATE 19

6.1. Economic Life or Project Life 19

6.2. Liquid revenue of sales 19

6.3. Operational costs 20

6.4. Operational expenses 21

6.5. Financial expenses 21

6.6. Depreciation, Amortization and Exhaustion expenses 22

6.7. Reversal of Depreciation, Exhaustion and Amortization 23

6.8. Operating Cash Flow 23

Conclusion 24

BIBLIOGRAPHY 25

________________

INTRODUCTION

The following school project has as theme the Cash Flow. During this work we can see that in a modern financial context of market competition there are companies with more efficient in the financial management of their resources, and there is no place for indecisions about what to do with them. A properly management of the financial resources reduces substantially the need for working capital, promoting higher profits by reducing financial expenses. This is the purpose of cash flow.

In fact, a company's financial activity requires continuous monitoring of their results in order to evaluate its performance and make the necessary. The basic purpose of the financial function is providing the company with enough cash resources to meet her various commitments and maximize is profits.

________________

1. OBJECTIVES

1.1. General objective

* Analyze the importance of cash flows to prepare financial projections translated into staggered cash flows over the time horizon.

1. Specific Objectives

* Understand the importance of cash flow investment on the decision-making process;

* Size the cash flow of investment projects;

* Use investment methods and techniques to define the best alternative for a project;

* Identify the main rules on Project Cash Flow.

1. CASH FLOW PROJECT

2.1. Cash Flow

The Cash Flow refers to the balance between the inflows and outflows from a company’s capital during a certain period of time that can be calculated by constructing a cash flow map. Usually, the measured flows are not strictly cash, but rather the transactions of operations that translate into monetary movements in the short term.

In this way, the concept of cash flow includes sales and costs (excluding costs that do not represent monetary movements, ie the depreciation of facilities and equipment) and not the receipts and payments.

Cash-Flow Formula:

CF = LR + AA - ERx

* CF cash-flow;

* LR liquid results;

* AA depreciations and other adjustments;

* REx extraordinary results;

Sometimes, on the cash-flow calculation only the operating costs and the operating income are used. On this case, the result is the operating cash flow, which measures the company's ability to generate cash through its normal activity, meaning that, in addition to being purged of extraordinary events, it is also purged from the results of the financial investments and financing policies.

By providing a measure of the company's ability to free up cash, cash flow becomes an excellent indicator of the company's ability to self-finance, is ability to make new investments without the need to external financing sources.

2.2. IMPORTANCE OF CASH-FLOW

Cash flow is indispensable to tell the financial direction of any business. Through it, it is possible to predict surplus or shortage of cash, determining this way the measures to be taken. In order to remain in operation, companies must liquidate their various commitments correctly, and as a basic condition to present the respective balance in their cash at the payout time. The insufficiency of cash may result in cuts in credits, suspension of deliveries of materials and merchandise, and cause serious problems in its operations.

The maintenance of cash balances propitiates immediate financial freedom to the company, revealing better ability to pay its obligations. In this position, management should not keep its