Cash Flow Analysis and Forecasting

This book is the definitive guide to cash flow statement analysis and forecasting. It takes the reader from an introduction about how cash flows move within a business, through to a detailed review of the contents of a cash flow statement. This is followed by detailed guidance on how to restate cash flows into a template format. The book shows how to use the template to analyse the data from start up, growth, mature and declining companies, and those using US GAAP and IAS reporting. The book includes real world examples from such companies as Black and Decker (US), Fiat (Italy) and Tesco (UK). A section on cash flow forecasting includes full coverage of spreadsheet risk and good practice. Complete with chapters of particular interest to those involved in credit markets as lenders or counter-parties, those running businesses and those in equity investing, this book is the definitive guide to understanding and interpreting cash flow data.

Introduction ix
Section One   Historic Cash Flow Analysis
1 Understanding How Cash Flows in a Business 3
2 Understanding Cash Flows Properly 21
3 Start-up, Growth, Mature, Decline 47
4 Restating the Cash Flows of a Real Business 59
5 Restating US GAAP Cash Flows 83
6 Analysing the Cash Flows of Mature Businesses 99
7 Analysing the Cash Flows of Growth Businesses 135
8 Growth and Mature - Further Analysis Issues 153
9 Analysing the Cash Flows of Start-up Businesses 171
10 Analysing the Cash Flows of Decline Businesses 179
11 What to do about Bad Cash Flows 185
12 Cash Versus Profit as a Measure of Performance 191
13 Cash Flow Analysis and Credit Risk 201
14 Cash Flow Analysis and Performance Measurement 215
15 Analysing Direct Cash Flow Statements 223
16 Generating a Cash Flow Summary from Profit and Loss Account and Balance Sheet Data 231
17 Summarising Historic Free Cash Flow 247
Section Two   Forecasting Cash Flows
18 Introduction 255
19 Spreadsheet Risk 263
20 Good Practice Spreadsheet Development 275
21 The Use of Assumptions in Spreadsheet Models 295
Index 305