Question 1

What is cash flow analysis and why is it important?

Accepted Answer

Cash flow analysis tracks the movement of money in and out of a business. It's critical for understanding liquidity, planning for growth, managing working capital, and ensuring you have enough cash to operate. Positive cash flow is essential for business survival.

Question 2

What is the difference between operating, investing, and financing cash flows?

Accepted Answer

Operating cash flows come from core business activities (revenue, expenses). Investing cash flows involve buying/selling assets. Financing cash flows involve debt, equity, and dividends. All three are important for understanding a company's financial health.

Question 3

What is burn rate and cash runway?

Accepted Answer

Burn rate is how quickly a company spends cash (usually monthly). Cash runway is how many months until cash runs out at the current burn rate. These metrics are critical for startups and businesses with negative cash flow.

Question 4

How do I calculate NPV and IRR?

Accepted Answer

NPV (Net Present Value) discounts future cash flows to today's value using a discount rate. IRR (Internal Rate of Return) is the discount rate that makes NPV zero. Both help evaluate investment opportunities and project profitability.

Question 5

What is working capital and why does it matter for cash flow?

Accepted Answer

Working capital is current assets minus current liabilities. Changes in working capital (like accounts receivable, inventory, accounts payable) directly impact cash flow. Managing working capital efficiently is crucial for maintaining positive cash flow.

Cash Flow Analysis

Analysis Parameters

Cash Flow Items

Cash Flow Analysis Results