某咨询财务分析工具(1).pptx

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1、 Author: Collins QianContributor: Chris Nelson bcCash FlowMarch 1998Copyright 1998 Bain & Company, Inc. 1bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowAgenda The importance of cash flowTypes of cash flowApplicationsCash flow stepsExerciseKey takeaways2bcBOS Copyright 1998 Bain & Company, Inc. C

2、ash FlowAgenda The importance of cash flowTypes of cash flowApplicationsCash flow stepsExerciseKey takeaways3bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowWhat is Cash Flow? Cash flow describes the movement of cash into (sources) and out of (uses) a company.Sources of cashCompanyUses of cash$4b

3、cBOS Copyright 1998 Bain & Company, Inc. Cash FlowWhy Do We Care About Cash? The market value of a company is equal to the present value of its expected future cash flowsVarious stakeholders demand cashinvestors demand CASH returnssuppliers and employees require CASH compensationdebtholders demand C

4、ASH paymentsAccounting methods can be used to “manage” earnings; CASH is harder to manipulateCash is King!Cash flow is the measure of a companys strategic value.5bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowEarnings vs. Cash Flow* Some accounting decisions impact earnings, but not cashIn 1988,

5、 General Motors made at least four decisions that impacted earnings but not cashEarnings do not equal cash flow.*Earnings are also called after tax profits or net incomeSuccessful high growth companies tend to have high earnings, but low cash flow; successful low growth companies tend to have low ea

6、rnings, but high cash flowAccounting DecisionExtended useful plant life from 35 to 45 year scheduleChanged the way it accounted for its pension planAdjusted its inventory valuation policyChanged the residual value assumption for cars it leasedEarnings Impact$790MM$480MM$217MM$270MMCash ImpactNoneNon

7、eNoneNoneTotal:$1,757MMNone6bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowAgenda The importance of cash flowTypes of cash flowApplicationsCash flow stepsExerciseKey takeaways7bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowTypes of Cash Flow Net cash flow is equal to the sum of the cash flow

8、s from operating, investing, and financing activities.Operating cash flowInvesting cash flowFinancing cash flowAbility of a companys recurring operations to generate cashAbility of a companys investment decisions to generate cashHow a company funds its operationsOperating profitsDecrease in working

9、capitalSale of fixed assetsLong-term issuance of shares Examples of sources:Operating losses Increase in working capitalPurchase of fixed assetsRepayment of loans Payment of dividends Examples of uses:8bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowOperating Cash Flow*Investing activities not re

10、lated to ongoing operations (such as the purchase or sale of divisions or companies, or investments in unrelated businesses) are not included in investing cash flow. They are included in financing cash flow.Operating cash flow excludes all cash flows related to a firms capital structurecash generati

11、on ability is independent of how a firm is financedIt excludes one-time eventsthese are not related to a firms recurring operationsOperating cash flow is used to measure the strategic value of a businessfor company valuations, operating and investing cash flows are used, not financing cash flowBain

12、is usually more interested in operating and investing* cash flow than in financing cash flowOperating cash flow measures the ability of a businesss recurring operations to generate cash.9bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowInvesting Cash FlowInvestments in ongoing operations - propert

13、y, plant and equipment - are included in investing cash flowcash is used to replace assets as they wear outif a business is to grow, additional assets must be acquiredin some cases, the cash used to acquire these assets is generated from the sale of existing noncurrent assetssuch cash inflows, howev

14、er, seldom cover the entire cost of asset acquisitions. Often times cash flow from operations is used to finance acquisitions, or, failing a positive operating cash flow, external financing is usedPure financing activities are not included in investing cash flow. They are included in financing cash

15、flowpurchase or sale of divisions or companiesinvestments in unrelated businessesInvesting cash flows relating to ongoing operations are used as a measure of the strategic value of a business. Those that are purely financing/investment mechanisms are used to evaluate the financial strategy of the bu

16、sinessInvesting cash flow measures the use of a businesss cash for the acquisition of non-current assets.10bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowFinancing Cash FlowMajor types of financing cash flow include: debt-related transactions8changes in long-term debt8interest income and expense

17、equity-related transactions8changes in common and preferred stock8dividends8short-term investmentslong-term asset and liability transactions8purchase or sale of a division or company8changes in long-term liabilitiesFinancing cash flow captures all the non-operating cash changes experienced during th

18、e year, and it provides information on how a company is funding its operations.11bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowStatement of Cash FlowsThe SCF is divided into three sections: operating, investing, and financingEach section shows sources and uses of funds for the accounting period

19、The SCF shows the amounts fordepreciation and amortizationcapital expenditurestaxes paiddividends paidIt does not show sources and uses by business unitIt does not provide much detail for example, it does not show capital expenditures by project, nor individual equipment purchasesThe SCF is not a su

20、bstitute for cash flow analysisThe statement of cash flows (SCF) found in annual reports is a good source of data for constructing cash flows, but sometimes it does not have the detail required for the analysis being done.12bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowAgenda The importance of

21、cash flowTypes of cash flowApplicationsCash flow stepsExerciseKey takeaways13bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowApplications Bain case teams use cash flow (CF) analysis to value investments/acquisitions, to improve the health of business units, and to help companies manage their port

22、folios.Valuation (mergers, acquisitions)Business unit analysisPortfolio managementWhat is the cash generation potential of an investment/ acquisition?What are we willing to pay (in cash) for that investment/acquisition?How healthy is a business unit?What factors have effected the business units abil

23、ity to generate cash/value over time?How can the business units cash management be improved?What is the overall balance of cash users/cash generators in a clients portfolio of businesses?How does this effect the clients overall cash position/outlook?What restructuring can be done to improve this pro

24、file?CF = common denominatorCF = measuring stickCF = portfolio tool14bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowAgenda The importance of cash flowTypes of cash flowApplicationsCash flow stepsExerciseKey takeaways15bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowCash Flow Cookbook*Cash is

25、defined as cash plus marketable securities minus short-term notes*I/S = income statement, SCF = statement of cash flows, B/S = balance sheet+/ - +/ - - +/ - =1. Profit before interest and tax (PBIT)2. Depreciation3. Other non-cash expenses/income4. Decrease/increase in working capital (excluding cas

26、h)5. Taxes paid6. Tax impact of interest income/expenseOperating cash flowBain case teams use the following cash flow cookbook: - =7. Capital expendituresInvesting cash flow+/ - +/ - +/ - +/ - - +/ - =8. Interest income/expense9. Tax impact of interest expense/income10. Increase/decrease in long-ter

27、m debt11. Increase in outstanding stocks/shares12. Dividends13. Changes in other accountsFinancing cash flow14. Reconcile with change in cash* from Balance SheetNet cash flowSource*I/SSCF, B/S and NotesNotesB/SI/S, B/SI/SSCF, B/S and NotesI/SI/SB/SB/SSCF, B/S, and NotesB/S, I/SB/S16bcBOS Copyright 1

28、998 Bain & Company, Inc. Cash FlowAgenda The importance of cash flowTypes of cash flowApplicationsCash flow stepsExerciseKey takeaways17bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowExercise - Background (p. 1)*This exercise is based on The Gillette Companys financial statements in 1996. Since

29、several modifications have been made to the financial statements, the information provided hereafter should not be used to analyze Gillettes financial performance.Net SalesCost of SalesGross ProfitSG&AProfit from OperationsInterest ExpenseIncome before taxesIncome TaxesNet Income1996$9,697.7MM($3,68

30、1.7MM)$6,016.0MM($4,379.7MM)$1,636.3MM($111.3MM)$1,525.0MM($576.3MM)$948.7MMIncome Statement: The New England Razor Company*Use the following data to calculate the cash flow for The New England Razor Company:18bcBOS Copyright 1998 Bain & Company, Inc. Cash Flow*Deferred taxes can be a liability acco

31、unt, an asset account, or both (as is the case here).AssetsCurrent AssetsCashMarketable securitiesReceivablesInventoriesDeferred income taxes*Prepaid expensesTotal Current AssetsProperty, Plant & EquipmentLiabilities and Stockholders EquityCurrent LiabilitiesLoans payableCurrent portion of Long-Term

32、 debtAccounts payable and accrued expensesIncome taxes payableTotal Current LiabilitiesLong-Term DebtDeferred Income Taxes*Other Long-Term LiabilitiesDividends PayableStockholders EquityCommon stockAdditional Paid-in CapitalRetained EarningsTreasury stockTotal Stockholders Equity$76.9$7.0$2,724.6$1,

33、358.2$359.3$227.2$4,753.2$5,192.0$9,945.2$656.7$14.5$1,964.9$298.6$2,934.7$1,490.4$298.9$630.2$100.1$671.4$707.0$4,168.7($1,056.2)$4,490.91995$81.6$1.6$2,290.8$1,267.6$246.8$199.3$4,087.7$4,456.6$8,544.3$634.7$26.5$1,609.8$319.4$2,590.4$1,048.4$303.4$635.1$66.7$667.1$574.8$3,704.2 ($1,045.8)$3,900.3

34、$9,945.2$8,544.3Balance SheetDecember 31, 1996 and 1995 (in $MM)1996Exercise - Background (p. 2)19bcBOS Copyright 1998 Bain & Company, Inc. Cash Flow Property, Plant and EquipmentLess accumulated depreciationNet Property, Plant, and Equipment1996 (in $MM)$7,820.4$2,628.4$5,192.01995 (in $MM)$6,885.0

35、$2,428.4$4,456.6Note 1: Property, Plant and EquipmentNote 2: DividendsThe company declared dividends of $484.2MM in 1996Note 3: Sale of assetsA loss of $22MM was incurred on equipment sold during the yearThe equipment had an original cost of $244.0MM and was sold for $40.9MMExercise - Background (p.

36、 3)Notes to the financial statements are a critical source of information.20bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowOperating Cash Flow*Cash is defined as cash plus marketable securities minus short-term notes*I/S = income statement, SCF = statement of cash flows, B/S = balance sheet+/ -

37、+/ - - +/ - =1.Profit before interest and tax (PBIT)2.Depreciation3.Other non-cash expenses/income4.Decrease/increase in working capital (excluding cash)5.Taxes paid6.Tax impact of interest income/expenseOperating cash flow - =7. Capital expendituresInvesting cash flow+/ - +/ - +/ - +/ - - +/ - =8.I

38、nterest income/expense9. Tax impact of interest expense/income10. Increase/decrease in long-term debt11.Increase in outstanding stocks/shares12. Dividends13. Changes in other accountsFinancing cash flow14. Reconcile with change in cash* from Balance SheetNet cash flowSource*I/SSCF, B/S and NotesNote

39、sB/SI/S, B/SI/SI/SI/SB/SB/SB/S, I/SB/SSCF, B/S and NotesSCF, B/S and Notes21bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowStep 1 - Profit Before Interest and TaxWhere to find:Process:Comments:Income statementIt can be labeled in many different ways, including profit before interest and tax, pro

40、fit from operations, operating profit, and earnings before interest and taxIf income statement is provided, pick number from income statementIf income statement is not provided, calculate profit before interest and tax:Profit before taxes - Interest income and other income (earned)+ Interest expense

41、 and other expenses (incurred) - Any one-time gains included in profit before taxes+ Any one-time losses included in profit before taxes= Profit before interest and tax (PBIT)The goal is to get profit before interest payments, tax payments, and extraordinary items22bcBOS Copyright 1998 Bain & Compan

42、y, Inc. Cash FlowStep 1 - Profit Before Interest and Tax - AnswerProfit before interest and tax*:$1,636.3MM1996Operating cash flow begins with profit before interest and tax.*Shown as profit from operations on The New England Razor Companys income statement23bcBOS Copyright 1998 Bain & Company, Inc.

43、 Cash FlowSteps 2 and 3 - Depreciation and Other Non-Cash Income/ExpensesWhere to find:Process:Depreciation - statement of cash flows, or calculate from Balance Sheet and NotesOther Non-Cash Income/Expenses - NotesReview assets and liabilities that are not taken into account in working capital (elem

44、ents of working capital include current assets and liabilities with the exception of cash, tax items, and financing assets and liabilities (e.g., interest and dividends payable)Ask two questions:was the item non-cash?was the item included in profit before interest and tax?If the answer to both is ye

45、s, adjust profit before interest and taxe.g., depreciation - add back to profit before interest and taxe.g., loss on sale of asset - add back to profit before interest and taxIf answer to either question is no, make no adjustments 24bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowStep 2 - Depreci

46、ationWhere to find:Process:Statement of cash flows, or calculate from Balance Sheet and NotesIf depreciation is provided in the statement of cash flows, pick number from thereIf not, calculate depreciation: Accumulated depreciation at year end - Accumulated depreciation at year beginning+ Depreciati

47、on from sale of asset= Depreciation expense for the yearDepreciation from sale of asset: Original cost of asset- Proceeds from sale of asset- Losses incurred= Depreciation from sale of asset25bcBOS Copyright 1998 Bain & Company, Inc. Step 2 - Depreciation - Answer (p. 1) Depreciation from sale of as

48、set= The original cost of asset - proceeds from sale of asset - losses incurred = $244.0MM - $40.9MM - $22.0MM = $181.1MMDepreciation expense for 1996 = Accumulated depreciation at year end - accumulated depreciation at year beginning + depreciation from sale of asset= $2,628.4MM - $2,428.4MM + $181

49、.1MM = $381.1MMCash FlowDepreciation is a non-cash expense. Therefore, it is added to profit before interest and tax in the operating cash flow.26bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowStep 2 - Depreciation - Answer (p. 2)Accumulateddepreciation (year end)Accumulateddepreciation(year beg

50、inning)Depreciation fromsale of assetsDepreciation expense$2,628.4MM($2,428.4MM)$181.1MM$381.1MM$0$500$1,000$1,500$2,000$2,500$3,000 Millions of DollarsThe depreciation expense for the year can be calculated from the balance sheet and notes. - +=27bcBOS Copyright 1998 Bain & Company, Inc. Cash FlowS