Cash Flows. 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 FlowsCash Flows

What is a cash flow summary What is a cash flow summary and a cash flow projection?and a cash flow projection?

A cash flow summary is the actual A cash flow summary is the actual result of money transactions during the result of money transactions during the year. A cash flow summary contains year. A cash flow summary contains the financial history of a business over the financial history of a business over a period of time, usually 1 year.a period of time, usually 1 year.

A cash flow projection deals with the A cash flow projection deals with the future plan of all money transactions future plan of all money transactions for a specific time period, usually 1 for a specific time period, usually 1 year. Generally the cash flow is year. Generally the cash flow is conducted on a monthly basis.conducted on a monthly basis.

What are the advantages of a What are the advantages of a cash flow projection?cash flow projection?

It shows the operator when excess cash will be It shows the operator when excess cash will be available, and when cash deficits will occur.available, and when cash deficits will occur.

It provides for budgeted loans that are borrowed It provides for budgeted loans that are borrowed only for the periods through which they are required.only for the periods through which they are required.

It provides a technique for combining personal and It provides a technique for combining personal and farm or ranch financial needs for the next period.farm or ranch financial needs for the next period.

It lets you plan purchasesIt lets you plan purchases It allows comparison of the cash flow projection with It allows comparison of the cash flow projection with

the cash flow summary to record actual performance the cash flow summary to record actual performance against the advanced planning.against the advanced planning.

It helps you evaluate the relationship of you short It helps you evaluate the relationship of you short term debt to your repayment capacityterm debt to your repayment capacity

It lets the manager immediately see the cash It lets the manager immediately see the cash position.position.

What are the disadvantages of a What are the disadvantages of a cash flow projection?cash flow projection?

Collection of data takes time.Collection of data takes time. Projected prices are difficult to Projected prices are difficult to

estimate.estimate. Borrowing rates may fluctuate.Borrowing rates may fluctuate. Family and business consumption of Family and business consumption of

resources may vary.resources may vary. Inventories constantly change.Inventories constantly change. The entire cash flow projection plan The entire cash flow projection plan

needs constant review and revision.needs constant review and revision.

Compile a cash flow from the Compile a cash flow from the financial data in the financial financial data in the financial

scenario.scenario.

Complete the cash flow work sheetComplete the cash flow work sheet

Analyzing the cash flow worksheet. Analyzing the cash flow worksheet.

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

$17,286 (April)$17,286 (April)

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

$579,698$579,698

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

$645,026$645,026

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

$625,298$625,298

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

00

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

December ($95,544)December ($95,544)

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

00

In what month does the Tucker’s In what month does the Tucker’s farm business have the most farm business have the most negative cash position?negative cash position?

April ($-15,286)April ($-15,286)

What is the largest projected What is the largest projected operating expense item?operating expense item?

Labor Hired ($152,325)Labor Hired ($152,325)

How much principal does the How much principal does the Tucker’s farm business plan to pay Tucker’s farm business plan to pay on all operating loans during the on all operating loans during the year?year?

$27,361$27,361