Cash Flows

1
Cash Flows
2
What is a cash flow summary and a cash flow
projection?

• A cash flow summary is the actual result of money
  transactions during the year. A cash flow
  summary contains the financial history of a
  business over a period of time, usually 1 year.
• A cash flow projection deals with the future plan
  of all money transactions for a specific time
  period, usually 1 year. Generally the cash flow
  is conducted on a monthly basis.

3
What are the advantages of a cash flow projection?

• It shows the operator when excess cash will be
  available, and when cash deficits will occur.
• It provides for budgeted loans that are borrowed
  only for the periods through which they are
  required.
• It provides a technique for combining personal
  and farm or ranch financial needs for the next
  period.
• It lets you plan purchases
• It allows comparison of the cash flow projection
  with the cash flow summary to record actual
  performance against the advanced planning.
• It helps you evaluate the relationship of you
  short term debt to your repayment capacity
• It lets the manager immediately see the cash
  position.

4
What are the disadvantages of a cash flow
projection?

• Collection of data takes time.
• Projected prices are difficult to estimate.
• Borrowing rates may fluctuate.
• Family and business consumption of resources may
  vary.
• Inventories constantly change.
• The entire cash flow projection plan needs
  constant review and revision.

5
Compile a cash flow from the financial data in
the financial scenario.

• Complete the cash flow work sheet

6
Analyzing the cash flow worksheet.

• What is the maximum amount they will have to
  borrow in any one month?

7

• 17,286 (April)

8

• What are the projected total operating receipts
  for the year 2005?

9

• 579,698

10

• What are the total cash outflows projected for
  the year 2005?

11

• 645,026

12

• What are the total cash inflows projected for the
  year 2005?

13

• 625,298

14

• What is the projected operating loan balance on
  December 31, 2005?

15

• 0

16

• In what month do they have they greatest positive
  cash difference?

17

• December (95,544)

18

• What was the beginning of the year operating loan
  balance?

19

• 0

20

• In what month does the Tuckers farm business
  have the most negative cash position?

21

• April (-15,286)

22

• What is the largest projected operating expense
  item?

23

• Labor Hired (152,325)

24

• How much principal does the Tuckers farm
  business plan to pay on all operating loans
  during the year?

25

• 27,361