Types of cash flows
Calculations of performance indicators are quite understandable and at first glance do not present big problems. If the investments are taken into account throughout the calculation period, in this case the cash flow will be compared with the investment flow. In a sense, the definition of the structure of cash flows, the definition of the settlement base is a creative process, and the result of the calculated indicators will depend on it.
There are three main cash flows that define periods and components for calculating performance indicators, but it is Net Cash Flow (NCF) that is the basis for calculating key investment performance indicators (integrated indicators).
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1. Net operating cash flow (NOCF)
There are direct and indirect methods for calculating the operating cash flow. Budget-Plan Express uses a direct method when planning cash flows that almost coincide with the final operating cash flow in the "cash flow statement".
Cash flow forecast by indirect method:
| Indicators | 1 st year | 2 st year | … | n year |
| Net profit after taxation | Х | Х | Х | Х |
| plus: depreciation | Х | Х | Х | Х |
| plus: release of working capital | Х | Х | Х | Х |
| plus: residual equipment cost | Х | Х | Х | Х |
| Additional cash flows due to changes in working capital | Х | Х | Х | Х |
| Net cash flow | Х | Х | Х | Х |
To calculate the cash flow in Budget-Plan Express, use the direct method , as the most accurate in predicting cash flows. In IFRS (IAS 7) it is recommended to use a direct method in financial planning. Indirect method is used when there are no forecasted values of revenue and all cash costs, but there is a fairly accurate forecast of the financial result.
2. Free Cash Flow (FCF)
FCF = NOCF + DInv, where DInv is the change in investment in assets, equal to the inflow of funds from the sale of assets, less the outflow of funds associated with the acquisition of assets. In another way, considering all investment flows, DInv is the difference in the growth of investments in fixed assets.
The definition of FCF as an indicator of IFRS is the difference between the receipt of money from the sale of goods and services and the expenditure of money associated with ensuring the production and sale of these goods and services, payment of taxes and investments. FCF - these are the funds potentially available to investors (owners and creditors of the enterprise).
3. Net Cash Flow (NCF)
This is the cash flow in which funding is completely excluded (both income and payments). To obtain a net cash flow from the total cash flow, financing (credit financing and equity instruments) is completely eliminated, and all financial payments, as a rule, to repay loans, are "returned".
It is pure cash flow (Net Cash Flow, NCF) is the basis for calculating investment performance indicators (integrated indicators). For users in the Budget-Plan Express, it is proposed to adjust (adjust) the parameters of net cash flow (see "General settings. Investment analysis").
To change the settings, see «General settings. Investment analysis».
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