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Mastering Cash Flow and Valuation Modelling by Alastair Day

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9

Cash flow

Outline

Cash flow statement

Cash for debt service

Cash waterfall

Chart

Summary

OUTLINE

The forecast model provides a trial balance in the form of an Income Statement and Balance sheet; however, this tells you nothing about the amount of cash produced or the company’s ability to meet its future financial obligations. You need to understand the ability to pay as a company risks going out of business if it does not generate sufficient cash. A company could raise capital in the form of further borrowing, but cash flow in the longer term has to be sufficient to meet all obligations.

Cash flow statements are required in most annual reports in order to show clearly the sources and uses of cash. The objectives are:

  • To identify the sources ...

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