Cash flow analysis, Financial Management

Assignment Help:

Cash flow analysis helps an analyst to identify certain financial difficulties which cannot be identified using the above ratios.  A firm may be shown as highly profitable when we analyze it using financial indicators such as profitability ratios,  turnover ratios and liquidity ratios  but by a study of cash flow of the company we may find that there is  hardly any cash or working capital to continue the operating cycle. On the other hand, a heavily loss-making firm may have sufficient cash flows. An analysis of cash flow statement helps an analyst in finding out how flexible a firm is.

To further asses a company, discretionary cash flow also can be computed. Discretionary cash flow is calculated by deducting capital expenditures from operational cash flow. Operational cash flow is arrived at by substracting increase in adjusted working capital from basic cash flow.

Another ratio which can be used to assess the company's cash flow is the cash flow from operations to capital expenditure ratio. This ratio is more useful for capital intensive firms. The higher the value, greater is the financial flexibility of the firm.


Related Discussions:- Cash flow analysis

Enumerate the potential drawbacks of divestment, Potential drawbacks of div...

Potential drawbacks of divestment - There may be some loss of economies of scale. Fixed overheads would have a lower capacity to recover them. - Cash generated may not be

Company capacity to continue trading, Company capacity to continue trading ...

Company capacity to continue trading Given the preceding discussion it is unlikely that the business can continue in its current form. The trading performance is clearly very

Calculate amount of first coupon payment your organization, Your firm has p...

Your firm has presently issued five year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%.  What is the amount of first coupon payment your organization will pa

Pension fund management: a global perspective, Pension Fund Management: A G...

Pension Fund Management: A Global Perspective Pension funds are known worldwide more for their social security element. They have assumed more importance from the day the priva

Explaqin advantage of any available cash discounts, Assume that you have be...

Assume that you have been consistently impressed by David and Tom Gardner of The Motley Fool since you first heard of their rather improbable rise to prominence in financial circ

What do you meant by yield, Q. What do you meant by Yield? Investment s...

Q. What do you meant by Yield? Investment should be in such securities which yield the highest return. However, safety should not be sacrificed at the expense of yield. How

Please help me solve this question, there are 3 compaies i have to find out...

there are 3 compaies i have to find out the price of equity share by using walters and gordons model.

Planning, how to do assignments based on these topics more specifically?

how to do assignments based on these topics more specifically?

Venture Capital, Difference between venture capital and conventional financ...

Difference between venture capital and conventional financing

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd