How Important Is a Cash Flow Analysis?

Cash flow structure analysis refers to the comparison and analysis of different items in the cash flow statement in the same period, analyzes the main source of cash inflows and the direction of cash outflows, and evaluates the impact of cash inflows and outflows on net cash flows.

Analysis of cash flow structure

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Cash flow structure analysis refers to the comparison and analysis of different items in the cash flow statement in the same period, analyzes the main source of cash inflows and the direction of cash outflows, and evaluates the impact of cash inflows and outflows on net cash flows.

Chinese name

Analysis of cash flow structure

Foreign name

Structural analysis of cash flow

Nature

Economic terms

Be applicable

enterprise

Cash flow structure ratio = Individual cash inflow (out) amount / total cash inflow

[Example] ABC's current cash inflow is 2,100,262 yuan, cash outflow is 1,737,367 yuan, and net cash flow is 362,895 yuan. Of the total cash inflow, cash from operating activities accounted for 74.86%, and income from investment activities

The structure analysis of cash flow can be divided into three aspects: cash income structure, expenditure structure and balance structure analysis.

Analysis of income structure.

The cash income composition reflects the cash income of various business activities of the enterprise, such as cash income from operating activities, cash income from investment activities, cash income from financing activities, etc. in the total cash income and the composition of specific items in the cash income from various business activities The situation, to clarify where the cash comes from, and what to rely on to increase cash income.

Analysis of expenditure structure.

The cash expenditure structure refers to the percentage of the company's various cash expenditures to the total cash expenditures of the current period, and it specifically reflects which aspects of the company's cash is used.

Analysis of balance structure.

The analysis of cash balance structure refers to the various business activities of an enterprise. Its net cash income and expenditure account for the percentage of the total cash balance, and it reflects how the company's cash balance is structured.

(1) According to the structure of cash inflows, we can understand the way in which an enterprise obtains cash income, so as to judge the size of the company's ability to obtain cash, and evaluate the quality of cash income.

First, the cash inflow from operating activities reflects the ability of a company's main business to create cash inflows. Only the prosperity of the main business is an inexhaustible source of cash.

Second, although cash inflows from investment activities are important, for general enterprises, it should not be the main source of cash increase, because after all, foreign investment is only an extension of the company's operating activities rather than the core.Although the ownership of foreign investment assets is in the investment company However, the actual control or management right of the asset is in the invested company, so the cash flow generated by foreign investment is uncertain and accidental, and it cannot replace operating activities as the protagonist of creating cash inflows. As for the cash inflow from internal disposal of long-term assets, it is more likely to be a last resort. Even if it is normal, it will not happen often.

Third, as for the cash inflow generated from financing activities, although it can reflect the size of the company's ability to obtain cash from the outside, whether the cash inflow it brings is also dependent on its use effect-whether it brings business activities and investment activities The increase in cash inflows, so the cash inflow of financing activities can not become the protagonist of creating cash inflows.

(2) According to the structure of cash outflows, we can understand the whereabouts of the company's cash expenditures, so as to judge the financial management level and financial management strategy of the enterprise.

Cash is a poorly profitable asset. It is not wise to hold too much cash. Therefore, the effectiveness of cash management is not to minimize cash expenditures or maintain a high cash balance, but to ensure adequate payments. Under the premise of ability, invest cash in assets with higher profitability. Therefore, the rationality of cash expenditure is an important factor for measuring the level of corporate financial management.

Generally, cash expenditures should first meet the needs of normal transactions in production and operations, such as payment of goods, wages, taxes, etc., before they can be used to pay interest on loans, distribute dividends, and finally consider foreign investment. Of course, to evaluate the rationality of the use of cash, it is difficult to judge based on structural indicators alone, because the needs of cash expenditures are different in different periods. Usually, as long as the ability to pay is normal, the proportion of various expenditures is not very important. However, if the structure of cash expenditure is compared with the previous period, it can reflect the financial management strategy of the enterprise. Generally speaking, if the proportion of cash expenditures from operating activities declines and the proportion of cash expenditures from investment activities increases, it means that on the basis of ensuring production and operations, enterprises use more funds to expand reproduction and foreign investment for further development. The increase in the proportion of cash expenditures in financing activities indicates that the debts of previous measures need to be repaid or that the company intends to issue more dividends in return for investors.