Mastering Financial Modelling in Microsoft Excel 3rd edn, 3rd Edition

7

Cash flow

Introduction

Deriving cash flow

Net operating cash flow (NOCF)

Free cash flow

Cover ratios

International cash flow

Summary

INTRODUCTION

While the balance sheet and income statement are based on generally accepted accounting standards and conventions, cash flow is ‘real’ and cannot be varied so much by management decisions about the presentation of financial information. Bankers want to understand cash flows since the priorities are that the company survives and generates sufficient cash to repay loans, lease rentals and other forms of borrowing. Corporate finance today concentrates more on cash as an international measure for assessing performance rather than accounting profit measures.

The model introduced in the last chapter, ...