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The Cash Flow Budget Worksheet is used to project your business's cash inflows and outflows over a certain period of time.
FREE CASH FLOW Free cash flow fundamentally in business measures performance by considering the cash available for distribution to the security holders and in settling the short term debts. Essentially free cash flow is calculated as Operating cash flow plus depreciation/amortization minus capital expenditure and increase in working capital. Free cash flow can also be defined as the available cash for company expansion; the free cash flow is not easily manipulated by accounting gimmicks such as accounting principles. Free cash flow is calculated income statement information, cash flow and balance sheet information. The free cash flow excel template allows the user to plug in revenues and expenses to calculate earnings before interest and expenses, then taxes are entered in order to arrive at operating profit and depreciation is then added back to give operating profit. The information is easily picked from income statement. The challenging part in determining the free cash flow can be in the calculation of the change in working capital. The working capital is calculated as current assets minus liabilities, but for the purpose of free cash flow, change in working capital is what is considered. To arrive at change in working capital, the user of the free cash flow template has to calculate the working capital for the year under consideration and for the previous year. The current year on consideration working capital less the previous year working capital will give the change in working capital. Some financial statement might give the change in working capital as an addition in the financial statement notes. Capital expenditure is taken from cash flow statements and it is the net change from investing activities. A negative free cash flow does not necessary indicates the company has a negative financial health; it is essentially good to dig for the reason behind the negative cash flow. Remember free cash flow is the cash available for the business expansion and a company might have heavily invested in expansion activities in the year. The advice when looking at investment opportunities is to consider analyzing free cash flow. The approach gives the investors the advantage of dissecting company finances beyond the accounting devise; keep in mind accounting can be devised to manipulate earnings while it is difficulty to fake free cash flow. Essentially free cash flow analysis is a stronger analysis in indicating the potential path of company growth and future capacity to generate more profits. The excel template is designed to assist the user look beyond the years under analyzes and go back five years, this will identify the pattern on firm free cash flow by looking at increase/decrease patterns and firm speeding behavior on investing activities. A deep analyzes will help investors determine whether the company is generating returns rate justifying non distribution of the cash. Unacceptable return rate can put directors on microscope to explain the efficiency of the company in utilizing available funds to generate wealth to the shareholders. FREE CASH FLOW January 1, 2012 1/2012 1/2011 Revenues $ 16,000.00 $ 16,000.00 Operating Expenses $ (600.00) $ (600.00) Earnings before interest and taxes (EBIT) $ 15,400.00 $ 15,400.00 Taxes $ (200.00) $ (200.00) Net operating profit $ 15,200.00 $ 15,200.00 Depreciation and Amortization $ 100.00 $ 100.00 Operating Cash Flow $ 15,300.00 $ 15,300.00 Change in working capital $ 500.00 $ 500.00 Capital Expenditure $ 1,000.00 $ 1,000.00 Capital Expenditure in other assets $ 3,000.00 $ 3,000.00 Cash Flow From Investment $ 4,500.00 $ 4,500.00 FREE CASH FLOW $ 10,800.00 $ 10,800.00 1/2010 1/2009 1/2008 $ 16,000.00 $ 16,000.00 $ 16,000.00 $ (600.00) $ (600.00) $ (600.00) $ 15,400.00 $ 15,400.00 $ 15,400.00 $ (200.00) $ (200.00) $ (200.00) $ 15,200.00 $ 15,200.00 $ 15,200.00 $ 100.00 $ 100.00 $ 100.00 $ 15,300.00 $ 15,300.00 $ 15,300.00 $ 500.00 $ 500.00 $ 500.00 $ 1,000.00 $ 1,000.00 $ 1,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 4,500.00 $ 4,500.00 $ 4,500.00 $ 10,800.00 $ 10,800.00 $ 10,800.00
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