Why do you need a cash flow budget and how to develop it. Analysis and assessment of company cash flows

To estimate cash flows, a number of simple ratios are used and specialized complex indicators, which include the following.

• 1. Momentary and interval multipliers, reflecting the financial results of an enterprise and defined as the ratio of the enterprise’s share price to a number of final performance indicators at a specific point in time or for a period. Momentary indicators include, for example:
  • price to gross income ratio;
  • price/earnings ratio before taxes;
  • price-to-price ratio net profit;
  • ratio of price to book value of equity capital.

As interval multipliers are used, for example:

• price-to-revenue ratio;
• price-earnings ratio;
• price-cash flow ratio;
• ratio of price and dividend payments.
• 2. Profitability indicators, for example:
  • return on assets ( ROA - is defined as the ratio of net profit to total assets;
  • return on investment ( ROI - calculated as return (the amount of income received, net profit) on invested capital;
  • return on equity ( ROE - is calculated as the ratio of net profit to the share capital of the enterprise.
• 3. The capitalization method exists in two modifications:
  • direct capitalization, according to which the value of an enterprise is determined as the ratio of the net annual income that the enterprise receives to the capitalization rate calculated on its own capital;
  • mixed investments, when the value of an enterprise is determined as the ratio of the net annual income that the enterprise receives to the total capitalization rate, which is determined by the weighted average value of the cost of equity and borrowed capital.
• 4. Valuation models based on profit indicators, including

number using:

• indicator of earnings before interest, taxes and depreciation - EBITDA, which allows you to determine the profit of an enterprise from its core activities and compare it with similar indicators of other enterprises;
• indicators of operating profit before interest and taxes - EBIT (Earnings before interest and taxes), net operating profit less adjusted taxes - NOPLAT (Net operating profit less adjusted tax) and net operating profit before interest expenses - NOPAT (Net operating profit after tax). The following scheme for calculating indicators is possible:

Revenue - Expenses as usual types of activities = EBIT - Tax(Adjusted income tax) = NOPLAT.

The income tax used in the calculation is called adjusted when there are differences between the financial and tax reporting of the enterprise. Current income tax in the income statement and the amount of income tax calculated for payment to the budget according to tax return, as a rule, have different meanings. Indicators NOPLAT And NOPAT associated with the calculation of economic added value EVA(English - economic value added). If when calculating the value NOPLAT data is taken from tax reporting, then the value of income tax is taken from financial reporting.

For calculation NOPLAT operating profit value is used EBIT from operating activities, adjusted for the amount of taxes that the enterprise would pay if it did not have non-operating income and expenses and borrowed sources of financing. Company McKinsey & Co proposed the following calculation method NOPLAT

EBIT- Income tax from the income statement - Tax shield on interest payments (Interest payments x Tax rate) - Non-operating income tax +

Change in the amount of deferred tax payments = NOPLAT.

Index NOPAT in the case where tax reporting is taken as a basis, it can be calculated using the formula:

NOPAT= EBIT- Tax = EBIT ( 1 - CT),

Where CT- tax rate paid on operating profit EBIT.

5. Cash flow indicator CF (cash flow) determines the financial result of the enterprise and is calculated as the difference between the total amount of capital receipts and expenditures. When capital investments exceed the amount of return, the value CF will be negative, in the opposite case - positive. Unlike earnings-based valuation metrics, SE takes into account investment investments immediately - in the year of their implementation, and not in parts - through depreciation, as is customary in accounting when calculating profit. The enterprise value is determined from the expression:

Enterprise value = Present value of cash flows of the forecast period + Present value of cash

extended period flows.

The method is used when there is confidence in the correct determination of the value of discounted cash flows for the years of the forecast and extended period.

• 6. Techniques combined into the concept of cost management VBM (value-based management), according to which the target management function is cash flows and enterprise value. At the end of the 20th century. indicators have been developed, e.g. MVA, SVA, CVA, CFROI, EVA, allowing you to calculate cash flows and costs

McKinsey & Co, Copeland, Koller, Murrin. Valuation. 3rd edition, p. 163. Model of economic profit. See http://fmexp.com.ua/ru/models/eva, 2010.

enterprises when used as an information base

financial statements of the enterprise:

• using cash flow measures, e.g. FCF (free cash flow), ECF (equity cash flow - cash flows for shareholders). This group of indicators operates in terms of discounted cash flows. In this case, the discount rate is calculated for the indicator ECF by model SARM, and to calculate the indicator FCF often taken equal to the weighted average cost of capital WACC. As a result of calculating the indicator FCF the cash flow available to shareholders and creditors of the company is recorded, and the indicator ECF- cash flow available to shareholders after repayment of debt obligations;
• using indicators NPV(English, net present value - net present value) And AGC(English, adjusted present value - adjusted present value). This group of indicators is used, for example, in the case when an enterprise can be presented as a set of parts, each of which can be assessed as an independent investment project. If there are one-time or distributed investments, the enterprise uses the indicator NPV The NPV indicator represents net cash flow, defined as the difference between the inflow and outflow of cash, reduced to the current point in time. It characterizes the amount of cash that an investor can receive after the proceeds recoup investments and payments. The difference in the calculation of the indicator AGC from calculating the indicator NPV consists in using the effect of “tax protection”;
• based on combining income and expenses - model EBO (Edwards - Bell - Ohlson valuation model). In this case, the advantages of the cost and income approaches are used. The value of an enterprise is calculated using the current value of its net assets and discounted flow, defined as the deviation of profit from its industry average;
• based on the concept of residual income using indicators EUA(English, economic value added - economic value added), MUA(English, market value added - market value added) And SUA(English, cash value added - added value of residual cash flow).

Let's consider individual evaluation indicators.

• 1. Market value added indicator MVA allows you to evaluate an object based on market capitalization and market value of debt. It shows the discounted value of current and future cash flows. Index MVA is calculated as the difference between the market price of capital and the amount of capital attracted by the enterprise in the form of investments. The higher the value of this indicator, the higher the performance of the enterprise is assessed. The disadvantage of the indicator is that it does not take into account interim returns to shareholders and the opportunity cost of invested capital.
• 2. Indicator SVA(English - shareholder value added) called an indicator of calculating value based on “shareholder” added value. It is calculated as the difference between the value of share capital before and after the transaction. When calculating this indicator, it is considered that added value for shareholders is created when the return on investment capital ROIC greater than the weighted average cost of capital raised WACC. This will only continue during the period when the enterprise is actively exploiting its competitive advantages. As soon as competition in this area increases, ROIC decreases, the gap between ROIC And WACC will become insignificant and the creation of “shareholder” added value will cease.

There is another definition SVA is the increment between the estimated and book value of share capital. The disadvantage of the method is the difficulty of predicting cash flows. The expression for calculating the cost is:

Enterprise value = Market value of invested capital at the beginning of the period + Amount SVA forecast period +

Market value of assets of non-conducting activities.

• 3. Total shareholder return indicator TSR(English - total shareholders return) characterizes the overall effect of investment income for shareholders in the form of dividends, an increase or decrease in the enterprise’s cash flows due to an increase or decrease in the stock price for a certain period. It determines the income for the period of ownership of the company's shares and is calculated as the ratio of the difference in the price of the company's shares at the end and beginning of the analyzed period to the share price at the beginning of the period. The disadvantage of this indicator is that it does not allow taking into account the risk associated with investments, which is calculated in relative form and determines the percentage of return on invested capital, and not the return amount itself, etc.
• 4. The cash flow indicator is determined by the return on invested capital CFROI(English - cash flow return on investment) as the ratio of adjusted cash inflows at current prices to adjusted cash outflows at current prices. The advantage of the indicator is that it is adjusted for inflation, since the calculation is based on indicators expressed in current prices. In the case when the value of the indicator is greater than the value set by investors, the enterprise generates cash flows, and if not, then the value of the enterprise decreases. The disadvantage is that the result obtained is presented as a relative indicator, and not as a sum of costs.
• 5. Indicator CVA(English - cash value added), otherwise called the LS/Tsang indicator. - residual cash flow), created in accordance with the concept of residual income and is defined as the difference between operating cash flow and the product of the weighted average cost of capital by the adjusted total assets. Unlike the indicator CFROI, this indicator takes into account the value WACC and the adjustments are similar to those made to calculate the indicator EVA.
• 6. Balanced Scorecard BSC(English - balanced

scorecard) was developed by D. Norton and R. Kaplan. The purpose of the system BSC is to achieve the goals set by the enterprise and take into account financial and non-financial factors for this. The system is based on the desire to take into account the interests of shareholders, buyers, creditors and other business partners.

System BSC arose as a result of the need to take into account non-financial indicators in business assessment and the desire to take into account indicators not included in the financial statements. The purpose of its application is to obtain answers to a number of questions, including: how do clients, partners and government authorities evaluate the enterprise, what are its competitive advantages, what is the volume and efficiency of innovation activities, what is the return on staff training and the implementation of corporate policies in social life team?

To effectively manage a business in this case, it is necessary to determine the values, objectives and strategy acceptable to shareholders, debtors and creditors, and develop methods for quantifying these interests. As these issues are resolved, the system BSC will become an important cash flow management tool.

7. Economic value added indicator EVA(English - economic value added) used when it is difficult to determine the cash flows of an enterprise for the future. Based on

residual income method developed by A. Marshall. Enterprise value based on indicator EVA in general can be calculated using the formula:

Enterprise value = Invested capital +

Present value EVA forecast period +

Present value EVA extended period.

Economic profit indicator EVA calculated using information about investment projects and financial reporting data as the difference between profit after tax, but before interest on borrowed funds and the costs (cost) of raising capital. Index EVA developed in the USA in the 1990s by the company Stern Stewart& Co, it allows you to compare how much a given enterprise earns in comparison with alternative projects. The enterprise value is equal to the sum of invested capital, as well as discounted values ​​of the indicator EVA current and future investments and is calculated using the formula:

EVA = NOPAT-SHSS x/C,

Where tss- weighted average cost of capital; 1C- valuation of capital (the amount of invested or attracted capital).

Application of the indicator EVA provides for a number of adjustments to the values ​​of financial reporting items for the calculation NOPAT and /C described Stewart G. Bennett .

Positive value EVA As a rule, it indicates an increase in the value of the enterprise, and a negative one indicates its decrease. Management system developed based on the indicator EVA, called EVA-based management and determines the need:

• quantitative measurement of the performance of employees and managers with a subsequent transition to assessment using aggregate indicators;
• development of generalized criteria for the effective placement and management of enterprise capital;
• creating incentives and motivation for work, bonus and remuneration systems and their mathematical description;
• development of indicators for assessing corporate culture, etc.

Index EVA can be used to evaluate the enterprise as a whole and to evaluate its individual objects.

• Lednev E.E. BSC and EVA® - competitors or allies? - http://www.cfm. ru/management/controlling/bsc-eva. shtml 04/16/2002
• Bennett G. Stewart. The Quest for Value. New York: Harper Business School Press, 1991; Copeland T., Koller T., Murrin J. The value of companies: valuation and management. Per. from English M.: ZAO "Olymp-Business", 2005.

Financial and economic activities of the enterprise can be presented in the form of cash flow, which characterizes the income and expenses generated by this activity. Making decisions related to capital investments is an important stage in the activities of any enterprise. To effectively use raised funds and obtain maximum return on invested capital, a thorough analysis of future cash flows associated with the sale is required developed operations, plans and projects.

Cash flow assessment carried out using discount methods taking into account the concept of the time value of money.

The task of the financial manager is to select such projects and ways of their implementation that will provide a cash flow that has the maximum present value compared to the amount of required capital investment.

Analysis investment project

There are several methods for assessing the attractiveness of investment projects and, accordingly, several main indicators of the effectiveness of cash flows generated by projects. Each method is based on the same principle: As a result of the implementation of the project, the company should make a profit(the enterprise’s equity capital must increase), while various financial indicators characterize the project with different sides and may meet the interests of various groups of persons related to a given enterprise (owners, creditors, investors, managers).

The first stage analysis of the effectiveness of any investment project - calculation of the required capital investments and forecast of the future cash flow generated by this project.

The basis for calculating all performance indicators of investment projects is the calculation net cash flow, which is defined as the difference between current income (inflow) and expenses (outflow) associated with the implementation of the investment project and measured by the number of monetary units per unit of time (monetary unit / unit of time).

In most cases, capital investment occurs at the beginning of the project at stage zero or during the first few periods, followed by an influx of cash.

From a financial point of view, the flows of current income and expenses, as well as net cash flow, fully characterize the investment project.

Cash flow forecasting

When forecasting cash flow, it is advisable to forecast data for the first year broken down by month, the second year - by quarter, and for all subsequent years - by total annual values. This scheme is recommended and in practice should correspond to the conditions of a particular production.

A cash flow for which all negative elements precede positive ones is called standard(classic, normal, etc.). For non-standard flow, alternating positive and negative elements is possible. In practice, such situations most often occur when completing a project requires significant costs (for example, dismantling equipment). Additional investments may also be required during the project implementation related to environmental protection measures

Advantages of using cash flows when assessing the effectiveness of the financial and investment activities of an enterprise:

cash flows exactly correspond to the time value of money theory - a basic concept of financial management;

cash flows are a precisely determinable event;

Using real cash flows avoids the problems associated with memorial accounting.

When calculating cash flows, you should take into account all those cash flows that change due to this decision:

costs associated with production (building, equipment and equipment);

changes in receipts, income and payments;

• changes in the amount of working capital;

  the opportunity cost of using scarce resources that are available to the firm (although this need not directly correspond directly to cash expenditures).

Should not be taken into account those cash flows that do not change in connection with the adoption of this investment decision:

past cash flows (costs incurred);

cash flows in the form of costs that would be incurred regardless of whether the investment project is implemented or not.

There are two types of costs that make up the total required capital investment.

Direct costs necessary to launch the project (construction of buildings, purchase and installation of equipment, investment in working capital, etc.).

Opportunity costs. Most often, this is the cost of used premises or land that could generate profit in another operation (alternative income) if they were not occupied for the project.

When forecasting future cash flow, you need to keep in mind that the reimbursement of costs associated with the necessary increase in the working capital of the enterprise (cash, inventory or accounts receivable) occurs at the end of the project and increases the positive cash flow relating to the last period.

The final result of each period, which forms the future cash flow, is the amount of net profit increased by the amount of accrued depreciation and accrued interest on borrowed funds (interest has already been taken into account when calculating the cost of capital and should not be counted twice).

In general, the cash flow generated by an investment project is a sequence of elements INV t , CF k

INV t - negative values ​​corresponding to cash outflows (for a given period, the total costs of the project exceed the total income);

CF k - positive values ​​corresponding to cash inflows (income exceeds expenses).

Since planning for future cash flow is always carried out under conditions of uncertainty (it is necessary to predict future prices for raw materials, interest rates, taxes, wages, sales volume, etc.), it is advisable to consider at least three possible implementation options to take into account the risk factor - pessimistic, optimistic and the most realistic. The smaller the difference in the resulting financial indicators for each option, the more resistant the project is to changes in external conditions, the lower the risk associated with the project.

Key indicators related to cash flow assessment

An important step in assessing cash flows is analysis of the financial capabilities of the enterprise, the result of which should be the value of the enterprise’s capital for different volumes of required investment.

WACC value is the basis for making financial and investment decisions, since in order to increase the capital of an enterprise, the following conditions must be met: the cost of capital is less than the return on its investment.

The weighted average cost of capital WACC is in most cases chosen as the discount rate when estimating future cash flows. If necessary, it can be adjusted to indicators of possible risk associated with the implementation of a specific project and the expected level of inflation.

If the calculation of the WACC indicator is associated with difficulties that cast doubt on the reliability of the result obtained (for example, when estimating equity capital), you can choose the average market return adjusted for the risk of the analyzed project as the discount rate.

In some cases, the value of the discount rate is taken equal to the indicator refinancing rates Central Bank.

Payback period of the investment project

Calculating the payback period of an investment is often the first step in the process of deciding on the attractiveness of a particular investment project for an enterprise. This method can also be used to quickly reject projects that are unacceptable from a liquidity point of view.

The company's creditors are most interested in calculating this indicator, for whom the fastest payback is one of the guarantees of return of the funds provided.

In the general case, the desired value is the value!!DPP??, for which!!DPP = min N??, at which ∑INV t / (1 + d) t more or equal ∑ CF k / (1 + d) k, where is the discount rate.

The decision criterion when using the payback period calculation method can be formulated in two ways:

the project is accepted if the payback as a whole takes place;

the project is accepted if the found DPP value is within the specified limits. This option is always used when analyzing projects that have a high degree of risk.

When choosing projects from several possible options projects with a shorter payback period will be preferable.

Obviously, the higher the discount rate, the higher the payback period.

A significant disadvantage of this indicator as a criterion for the attractiveness of a project is ignoring positive cash flow values beyond the calculated period . The result is a project that would bring more overall arrived enterprise for the entire period of implementation, may turn out to be less attractive according to the criterion!!DPP?? compared to another project that produces a much smaller bottom line profit but recovers the initial costs more quickly. (By the way, this circumstance does not concern the creditors of the enterprise at all.)

This method also does not distinguish between projects with the same value!!DPP??, but with different distribution of income within the calculated period. Thus, the principle of the time value of money when choosing the most preferable project is partially ignored.

Net present value (discounted) income

NPV indicator reflects a direct increase in the company’s capital, therefore it is the most significant for the company’s shareholders. Net present value is calculated using the following formula:

NPV = ∑ CF k / (1 + d) k - ∑INV t / (1 + d) t .

The criterion for project acceptance is a positive NPV value. In cases where it is necessary to make a choice from several possible projects, preference should be given to the project with a larger net present value.

It is necessary to take into account that the ratio of NPV indicators of various projects is not invariant with respect to changes in the discount rate. A project that was more preferable according to the NPV criterion at one rate value may turn out to be less preferable at another value. It also follows from this that the PP and NPV indicators may give conflicting assessments when choosing the most preferable investment project.

To make informed decisions and take into account possible changes in the rate (usually corresponding to the cost of invested capital), it is useful to analyze the graph of NPV versus d. For standard cash flows, the NPV curve is monotonically decreasing, tending with increasing d to a negative value equal to the reduced value of the invested funds (∑ INV t / (1 + d) t). The slope of the tangent at a given point on the curve reflects the sensitivity of the NPV indicator to changes in d. The greater the angle of inclination, the riskier the project: a slight change in the market situation that affects the discount rate can lead to serious changes in the predicted results.

For projects in which large incomes occur in the initial periods of implementation, possible changes in net present value will be smaller (obviously, such projects are less risky, since the return on invested funds occurs faster).

When comparing two alternative projects, it is advisable to determine the value barrier the rate at which the net present value of two projects is equal. The difference between the discount rate used and the barrier rate will represent the margin of safety in terms of the advantage of the project with great value NPV If this difference is small, then an error in choosing the rate d may lead to the fact that a project will be accepted for implementation, which in reality is less profitable for the enterprise.

Internal rate of return

The internal rate of return corresponds to the discount rate at which the present value of the future cash flow coincides with the amount of invested funds, i.e. it satisfies the equality

∑ CF k / (1 + IRR) k = ∑INV t / (1 + IRR) t .

Finding this indicator without the help of special tools (financial calculators, computer programs) in the general case involves solving an equation of degree n, and therefore is quite difficult.

To find the IRR corresponding to the normal cash flow, you can use a graphical method, given that the NPV value becomes 0 if the discount rate coincides with the IRR value (this is easy to see by comparing the formulas for calculating NPV and IRR). The so-called graphical method for determining IRR is based on this fact, which corresponds to the following approximate calculation formula:

IRR = d 1 +NPV 1 (d 2 - d 1 ) / (NPV 1 - NPV 2 ) ,

where d 1 and d 2 are rates corresponding to some positive (NPV 1) and negative (NPV 2) values ​​of net present value. The smaller the interval d 1 - d 2, the more accurate the result obtained. In practical calculations, a difference of 5 percentage points can be considered sufficient to obtain a fairly accurate value of the IRR value.

The criterion for accepting an investment project is that the IRR exceeds the selected discount rate. When comparing several projects, projects with larger IRR values ​​will be more preferable.

In the case of a normal (standard) cash flow, the condition IRR > d is satisfied simultaneously with the condition NPV > 0. Making a decision using the NPV and IRR criteria gives the same results if the possibility of implementing a single project is being considered. If several different projects are being compared, these criteria may produce conflicting results. It is believed that in this case the net present value indicator will have priority, since, reflecting an increase in the enterprise's equity capital, it is more in line with the interests of shareholders.

Modified internal rate of return

For non-standard cash flows, solving the equation corresponding to the definition of the internal rate of return, in the vast majority of cases (non-standard flows with a single IRR value are possible) gives several positive roots, i.e., several possible values ​​of the IRR indicator. In this case, the IRR > d criterion does not work: the IRR value may exceed the discount rate used, and the project under consideration turns out to be unprofitable.

To solve this problem in the case of non-standard cash flows, an analogue of IRR is calculated - the modified internal rate of return MIRR (it can also be calculated for projects generating standard cash flows).

MIRR is an interest rate at which, when accrued during the project implementation period n, the total amount of all investments discounted at the initial moment results in a value equal to the sum of all cash inflows accrued at the same rate d at the end of the project:

(1 + MIRR) n ∑ INV / (1 + d) t = ∑ CF k (1 + d) n-k .

Decision criterion MIRR > d. The result is always consistent with the NPV criterion and can be used to evaluate both standard and non-standard cash flows.

Profitability rate and profitability index

Profitability is an important indicator of investment efficiency, since it reflects the ratio of costs and income, showing the amount of income received for each unit (ruble, dollar, etc.) of invested funds.

P = NPV / INV · 100%.

Profitability index (profitability ratio) PI - the ratio of the present value of the project to the costs, shows how many times the invested capital will increase during the implementation of the project:

PI = [∑ CF k / (1 + d) k ]/INV = P/100% + 1.

The criterion for making a positive decision when using profitability indicators is the ratio P > 0 or, which is the same, PI > 1. Of several projects, those with higher profitability indicators are preferable.

The profitability criterion may produce results that contradict the net present value criterion if projects with different amounts of invested capital are considered. When making a decision, you need to take into account the financial and investment capabilities of the enterprise, as well as the consideration that the NPV indicator is more in line with the interests of shareholders in terms of increasing their capital.

In this case, it is necessary to take into account the influence of the projects under consideration on each other, if some of them can be accepted for implementation at the same time and on projects already being implemented by the enterprise. For example, the opening of a new production facility may result in a reduction in sales of previously produced products. Two projects implemented simultaneously can produce both greater (synergy effect) and less results than in the case of separate implementation.

Summarizing the analysis of the main indicators of cash flow efficiency, the following important points can be highlighted.

Advantages of the PP method (a simple method for calculating the payback period):

simplicity of calculations;

accounting for project liquidity.

By cutting off the most dubious and risky projects in which the main cash flows occur at the end of the period, the PP method is used as a simple method for assessing investment risk.

It is convenient for small companies with insignificant cash turnover, as well as for express analysis of projects in conditions of lack of resources.

Disadvantages of the PP method:

the choice of the barrier value of the payback period may be subjective;

The profitability of the project beyond the payback period is not taken into account. The method cannot be used when comparing options with the same payback periods, but different lifespans;

the time value of money is not taken into account;

not suitable for evaluating projects related to fundamentally new products;

the accuracy of calculations using this method largely depends on the frequency of dividing the life of the project into planning intervals.

Advantages of the DPP method:

takes into account the time aspect of the value of money, gives a longer payback period for investments than PP, and takes into account more cash flows from capital investments;

has a clear criterion for project eligibility.

When using DPP, a project is accepted if it pays for itself over its life;

the liquidity of the project is taken into account.

The method is best used to quickly reject low-liquidity and high-risk projects in conditions of high inflation.

Disadvantages of the DPP method:

does not take into account all cash flows coming after the completion of the project. But, since DPP is always greater than PP, DPP excludes a smaller amount of these cash receipts.

Advantages of the NPV method:

is focused on increasing the wealth of investors, therefore is fully consistent with the main goal of financial management;

takes into account the time value of money.

It is difficult to objectively estimate the required rate of return. Its choice is a decisive point in NPV analysis, since it determines the relative value of cash flows at different time periods. The rate used in estimating NPV should reflect the required risk-adjusted rate of return;

it is difficult to assess such uncertain parameters as moral and physical depreciation of fixed capital; changes in the organization's activities. This may lead to incorrect estimates of the service life of fixed assets;

the NPV value does not adequately reflect the result when comparing projects:

• with different initial costs with the same amount of net present;

  with a higher net present value and a long payback period and projects with a lower net present value and a short payback period;

may produce inconsistent results with other cash flow measures.

The method is most often used when approving or rejecting a single investment project. It is also used when analyzing projects with uneven cash flows to assess the value of the project’s internal rate of return.

Advantages of the IRR method:

objectivity, information content, independence from the absolute size of investments;

gives an assessment of the relative profitability of the project;

can easily be adapted to compare projects with different levels of risk: projects with a high level of risk should have a higher internal rate of return;

does not depend on the chosen discount rate.

Disadvantages of the IRR method:

complexity of calculations;

possible subjectivity in the choice of standard yield;

greater dependence on the accuracy of estimates of future cash flows;

implies mandatory reinvestment of all income received, at a rate equal to IRR, for the period until the end of the project;

not applicable for estimating non-standard cash flows.

The most commonly used method, due to the clarity of the results obtained and the possibility of comparing them with the yield of various market financial instruments, is often used in combination with the payback period method

Advantages of the MIRR method:

gives a more objective assessment of the return on investment;

less likely to conflict with the NPV criterion;

Disadvantages of the MIRR method:

depends on the discount rate.

The MIRR method is used in the same cases as the IRR method in the presence of uneven (non-standard) cash flows, causing the problem of multiple IRRs.

Advantages of the P and PI method:

the only indicator of all that reflects the ratio of income and costs;

gives an objective assessment of the profitability of the project;

applicable to assess any cash flows.

Disadvantages of the P and PI method:

may give conflicting results with other indicators.

The method is used when the payback method and the NPV (IRR) method give conflicting results, as well as when the amount of initial investment is important for investors.

Analysis of criteria for the effectiveness of investment projects. Comparison of NPV and IRR.

If the NPV and IRR criteria are applied to a single project in which only cash inflows occur after the initial cash outlay, then the results obtained by both methods are consistent with each other and lead to identical decisions.

For projects with other cash flow schedules, the value of the internal rate of return IRR may be as follows:

no IRR:

• a project in which there is no cash expenditure always has a positive NPV value; therefore, the project has no IRR (where NPV = 0). IN in this case IRR should be abandoned and NPV should be used.

  Since NPV > 0, this project should be accepted;< 0, то данный проект следует отвергнуть;

A project that has no cash flows always has a negative NPV and has no IRR. In this case, you should abandon IRR and use NPV; since NPV

the opposite of IRR. A project that first receives cash and then spends it has an IRR that is never consistent with the NPV (a low IRR and a positive NPV will occur simultaneously);

several IRRs. A project that alternates between receiving and then spending cash will have as many internal rates of return as there are changes in the direction of cash flows.

3. Ranking of projects is necessary if:

projects are alternative to be able to choose one of them;

the amount of capital is limited, and the company is not able to collect enough capital to implement all good projects;

there is no agreement between NPV and IRR. If two methods are used simultaneously: NPV and IRR, different rankings often occur.

Project Time - Projects that take place over a long period of time may have a low internal rate of return, but over time their net present value may be higher than short-term projects with a high rate of return.

Choosing between IRR and NPV:

If we use the NPV method as a criterion for selecting an investment project, then it leads to maximizing the amount of cash, which is equivalent to maximizing value. If this is the firm's goal, then the net present value method should be used;

If the IRR method is used as a selection criterion, it leads to the maximization of the firm's growth percentage.

When a company's goal is to increase its value, the most important characteristic of investment projects is the degree of return, the opportunity to earn cash for reinvestment.

Estimation of cash flows of different durations

In cases where there is doubt about the correctness of comparison using the considered indicators of projects with different implementation periods, you can resort to one of the following methods.

Chain repeat method

When using this method, the smallest common multiple of the implementation time of the estimated projects is found. They construct new cash flows resulting from several project implementations, assuming that costs and income will remain at the same level. Using this method in practice may involve complex calculations if several projects are being considered and each will need to be repeated several times to meet all deadlines.

The discounted cash flow method assumes that the measure of discounted projected income A t from a business, which was previously considered as the basis for determining its market value and the enterprise carrying out this business, is not projected profits, but cash flows. The simplest definition of cash flow () comes down to the fact that cash flow for a specific period (year, quarter, month) is nothing more than the balance of business receipts (with a plus sign) and payments (with a minus sign).

Past cash flows are recorded simply as those contained in the entity's statement of cash flows.

The future cash flows of a business are projected based on the net earnings of the business (gross income minus operating costs, interest on loans and income taxes), adjusted to reflect as closely as possible the balance of receipts and payments that are likely to occur in a given future period. .

The main advantages of business valuation, within the framework of the income approach, based on a forecast of cash flows, and not just profits, are as follows: . Firstly, future profits from a business directly take into account only the expected current costs of producing and selling products, while future capital investments to maintain and expand the production or trading capacity of a business are reflected only partially in the profit forecast - through their current depreciation . Secondly, The lack of profit (loss) as an indicator in investment calculations for business valuation is also explained by the fact that profit, being a purely accounting reporting indicator, is subject to significant manipulation. Its declared value depends on the method of accounting for the cost of purchased resources in the cost of products sold (LIFO, FIFO, moving average method), on the accelerated depreciation method, on the criterion for including products in sold products (upon the receipt of funds for its payment or upon fulfillment of what is stipulated in the contracts for delivery of the delivery basis), etc.

The LIFO (last-in-first-out) method is that the cost of purchased resources taken from inventories that are constantly replenished, but purchased at different times at inflationary prices, is calculated at the highest purchase prices of the last batches of materials received in inventories, raw materials, semi-finished products or components. As a result, the cost of manufactured and sold products is artificially (but quite legally) inflated, and profits are underestimated. The FIFO (first-in-first-out) method, on the contrary, involves taking into account the cost of purchased resources in the cost of goods sold (included in the costs of goods sold in the income statement) at the low prices of the earliest purchases, which reduces the profit and loss in the income statement. losses and increases reported profits. The “moving average” method is also possible, when in the income statement the cost of a particular purchased item is calculated according to average price its lots purchased at different times, weighted by their volumes. The choice of one of these three methods of accounting for the cost of purchased resources in the cost of products sold is made by the enterprise itself (as an integral part of its accounting system), in relation to a specific product. When updating products (even formally), the situation of choice arises again, choosing the LIFO method (for example, to save on income taxes) or the FIFO method (for example, to improve published profit indicators and increase its financial attractiveness in the eyes of potential investors on the eve of the placement of new issues of shares ), an enterprise, in fact, can seriously distort the actual picture of its financial condition through its declared profit.

In addition, the enterprise does not “live” from profit. The entire real life of the enterprise and real money for investors as a result of investing their investments depend on the movement and availability of funds at the enterprise - the balance of funds in the current (settlement) account and cash in hand.

Let us consider the noted aspects in more detail.

1. Method dcash flow discounting

cash discounted capital

1.1 Cash flows

Cash flow as a term, as already indicated once, is a literal translation from English “cash-flaw”. In Russian official terminology (according to the already mentioned Methodological Recommendations for assessing the effectiveness of investment projects and selecting them for financing, approved by the Ministry of Finance, the Ministry of Economy, Gosstroy and Goskomprom of the Russian Federation on March 31, 1994), this indicator is called the “balance of real money” or simply “real money” enterprises. This indicator reflects the cash flow of the enterprise and, taken into account at the end of the corresponding financial period (in some cases, it is advisable to keep records as of the middle of the corresponding period, which requires reducing the exponent in the discount factor by 0.5 - see below), reflects the balance of funds on the current (settlement) bank account of the enterprise in conjunction with the “cash desk” of its cash funds. Funds in deposit accounts are already considered as an asset invested in loan investments, to a certain extent blocked (hence, insufficiently liquid). The balance of receipts and payments made at the market value of means of payment - barter, bills, etc. - are not examined here for simplicity. .

Using the discounted cash flow method, you can calculate either the so-called equity cash flow or the non-debt cash flow.

Cash flow for equity capital (total cash flow), working with which you can directly assess the market value of the enterprise’s equity capital (which is the market value of the latter), reflects in its structure the planned method of financing initial and subsequent investments that ensure the life cycle of the product ( business lines). In other words, this indicator makes it possible to determine how much and on what terms borrowed funds will be raised to finance the investment process. For each future period, it takes into account the expected increase in the enterprise's long-term debt (influx of newly borrowed credit funds), decrease in the enterprise's liabilities (outflow of funds due to the repayment of part of the principal debt on previously taken loans planned for a given future period), payment of interest on loans in the order their ongoing maintenance. As long as the share and cost of borrowed funds in financing a business (investment project) is already taken into account in the forecasted cash flow itself, discounting of the expected cash flows, if these are “full cash flows,” can occur at a discount rate equal to that required by the investor (taking into account risks) the return on investment of only his own funds - i.e., at the so-called discount rate for equity capital, which in the future (“by default”) will be simply called the “discount rate.” Without debt, cash flow does not reflect the planned movement and cost of borrowed funds used to finance the investment process. Therefore, if in calculations they operate with it, then (at least at the time of the probable offer of the enterprise for sale, in statics, reflect the share and cost of borrowed funds attracted to it) discounting of cash flows expected for the investment project (at different stages of the business life cycle) should be made at a rate equal to the weighted average cost of capital of the enterprise. In this case, the expected residual value of the enterprise obtained by summing discounted cash flows without debt will be an estimate of the value of all capital invested in the enterprise at the time of its resale. In other words, to estimate the value of its equity capital (i.e., the market value of the enterprise as such), it will be necessary to subtract the long-term debt of the enterprise planned for the moment under consideration (beyond the financial period, which serves as the size of the “step” in time in this analysis).

The cash flow for [estimating] equity (total cash flow) can be projected in two ways:

Directly from an analysis of the terms, amounts and conditions of payments and receipts stipulated by the concluded purchase, sales, labor, lease, loan and other agreements, if their validity period fully covers the entire life cycle of the business line or product in question (which is likely only for fairly short-term projects , for which there are at least draft relevant contracts);

Based on an assessment of the need for investment and a forecast of future current income and expenses of the enterprise.

It is most realistic, of course, to start from expected profits (losses), without counting on the ability to plan future account balances directly from the analysis of concluded contracts. Then the cash flow in a certain future period t (at the end of it - less often in the middle) can be expressed as follows:

“Cash flow in period t” = “Profit (loss) for period t” + “Depreciation of previously purchased and created fixed assets (depreciation charges for period t)” - “Interest payments in period t on loans” - “Profit tax” - “Investments in period t” + “Increase in long-term debt for period t” - “Decrease in long-term debt for period t” - “Increase in own revolving funds in period t".

Note that the increase in own working capital here means an increase in stocks of raw materials and materials, work in progress, as well as the stock of finished, but unsold or unpaid products - i.e. everything in which own working capital turned out to be connected and aimed at replenishing them monetary resources. Let us also draw attention to the fact that the movement of short-term debt is not taken into account in the above formula, since it is believed that its turnover “fell within” the turnover of the enterprise’s funds that took place within the corresponding reporting period (interest on it was taken into account when calculating the cost of production). .

The structure of the total cash flow formula is quite simple: with a minus it indicates funds actually leaving the enterprise, with a plus - incoming funds. The only exception is the depreciation of fixed assets (depreciation charges for their wear and tear): the appearance of this indicator in the cash flow formula only means that by adding its value to the declared accounting profit, we, as it were, “restore justice” and compensate for what is already included Accounting expenses (costs) taken into account when calculating profit included depreciation charges for depreciation of fixed assets, which, however, do not imply a real withdrawal of funds from the enterprise (they are only credited to the depreciation fund of the same enterprise).

Debt-free cash flow can be estimated using a formula similar to the above - with the difference, however, that it will not include interest payments, increases and decreases in long-term debt. The decisive element of cash flow in any form is the expected profit from the sale of the product. In general, the formula for its forecast for period t looks like this:

where is the profit from the sale of the enterprise’s product in period t;

P t - expected selling price of the product in period t;

Q t - the planned number of sales of the enterprise's product at price P in period t; k = 1,..., K - a set of purchased resources (including labor of different qualifications) necessary to produce a product (k is the number of the purchased resource, K is their total quantity);

P tk is the purchase price of the purchased resource with number k in period t;

Q tk - volume (in in kind) purchased resource with number k, necessary for the release of the final product in quantity Q t ;

W t1 - overhead costs expected in period t (for a single-product venture, they can be zero).

Information about possible P t in relation to Q t can be obtained from marketing research of projected demand (its capacity and price elasticity) for the product being developed. Information about the probable P tk should be provided as a result of market research of the current and future supply of relevant purchased inputs. The values ​​of Q tk are subject to assessment from ideas (which enterprise managers need to have) about the product production technology available to the enterprise (the matrix of Q tk values ​​for different resources and different subsequent periods of use of this technology should be quite accurately expertly assessed - taking into account the planned as it develops release of a product saving material, energy and labor resources).

Both the cash flow for equity and the non-debt cash flow can, in turn, be nominal (at prices of future periods) or real (at prices of the base period, i.e., the period when the corresponding forecast is prepared).

The forecast of nominal cash flows requires an assessment of how the prices for all resources purchased for the product and the prices for the product itself will change separately. At the same time, they try to take into account inflation expectations (expected inflation rate), which, most likely, will be different in the markets of different goods and services. In other words, when forecasting nominal cash flows, different rates of inflation growth are factored into the expected prices of purchased resources and products (which is natural, since overall inflation always reflects the average price increase for various goods and services). They are trying to determine at what future actual prices (including both the inflation accumulated at the time of planned sales and purchases, and inflation expectations for the period after these moments) sales and purchases will be carried out. Obviously, working with nominal cash flow can provide higher accuracy of investment calculations - provided, however, that the appraiser is really well versed in the current and expected conditions in the sales markets of the product being developed and the markets for the purchased resources required for it, and relies on relevant representative marketing research data markets, imagines the impact of future competition (calculates the effect of having certain competitive advantages). If he is only approximately oriented in the indicated conditions (the necessary marketing research has not been carried out), then the use of nominal cash flow can introduce an even greater error into the investment calculation. .

Then the discounted cash flow method should be implemented, predicting real cash flows for the product line being developed. They represent the balance of receipts and payments expected in periods t for sales of the product and purchases of resources, which will be valued at prices of the base period (at the time of the evaluation). This does not mean that the prices included in the forecast of future cash flows will remain unchanged. They should be different for different future periods t, but only to the extent that the initial price (without including in its change the “reserve” for expected inflation) turns out to be dependent on the predicted shifts in the demand for the product or in the supply of the purchased resource.

The enterprise’s own pricing policy, regardless of inflation, initially planned by the enterprise (for example, in terms of maintaining the price of a new product in order to conquer the market below the cost of the product, temporarily increased during the development period, and then increasing, all other things being equal, this price and maintaining it at a certain level for quite a long time, with an expected reduction in the cost of the product as experience in its production accumulates - the so-called “umbrella” planned price dynamics of the enterprise - the pioneer of a new product) can also be taken into account when determining future sales prices of the product, calculated in prices of the base period .

Already in connection with the choice of the type of cash flow that will be used when assessing the current residual value of the product line (business line) at the time of the proposed resale of the enterprise, we immediately note that the type of cash flow included in the calculation must unambiguously determine (“looking ahead”) the type a discount rate adequate to the type of cash flow used, at which the cash flows forecast for the product should be discounted.

If they work with a nominal cash flow, which takes into account prices in their predicted actual value (including inflationary price increases) when calculating expected profits, then the discount rate should be nominal, i.e., including the average for the useful life of the project (the product line being developed ) calculated for a single period t, inflation expectations.

If cash flows are planned as real (in prices of the base period), then the discount rate must also be “cleaned” from inflation expectations.

Using the cash flow for equity capital in investment calculations, it is sufficient to use the nominal or real (depending on whether nominal or real future cash flows are estimated) risk-free interest rate (in practice, the corresponding rate on government long-term bonds) as a discount rate ), which, according to the methods given below, in order to bring the same amount of initial investment without a risky loan alternative to a risk level comparable to the project being calculated, is increased by the amount of premiums accepted on the market for the risks of this project. This rate is called the discount rate for estimating the equity capital of enterprise i.

Due to the fact that the size and cost of borrowed funds raised to finance investments in the project are already taken into account in the calculation of the projected cash flows themselves, it does not take into account the different costs of using the enterprise's own and borrowed capital. Thus, if we use cash flows for equity capital as a measure of expected business income A t, then, according to the income approach methodology, the estimated market value of business C will be equal to:

where DP t - cash flows for equity capital forecast for the business for the next year (quarter, month);

i is a discount rate that takes into account business risks and is determined, for example, according to a capital asset valuation model or using the method of cumulative construction of a discount rate.

When the subject of an assessment is an enterprise that carries out a business, but also has assets that are surplus to this business (“non-functioning assets”, which, however, not only do not function at the time of assessment, but are also not needed for it in the future, do not determine during the period n the expected cash flows from it, already included in the calculation of the PV ost indicator). to the value reflected above must be added to their market value NFA*:

For the most general case, when the enterprise being valued runs several businesses (produces several types of products) with numbers j (j=1, .J) and, in addition, has assets that are surplus to all of them, the estimated market value of the enterprise can be presented as the sum of market the value of his businesses plus the market value of their surplus assets:

If part of the enterprise’s property is only temporarily not needed for its business, then it cannot be included in the NFA* indicator, since this will eliminate the possibility of taking into account when calculating the value of businesses those incomes that are relied on in the future after the start of using only temporarily unnecessary assets. In such situations, you should try to include the rental of temporarily surplus assets (leasing) into the enterprise's many business lines.

1.2 Definition of becomingki discount fordiscounting withoutdebtcash flows (weighted average cost of capital method)

In cases where for some reason it is impossible to plan cash flows along the product line taking into account the movement of borrowed funds (a specific method of financing investments that are planned in future periods t, starting with starting investments, has not yet been worked out, all relevant loan agreements have not been prepared , creditors are only invited to finance a business (project) at rates that compensate for their risks), the comparative cost of debt and equity capital should be reflected at least in the discount rate.

Moreover, the current value of the business, if such an assessment is obtained based on expected debt-free cash flows, assumes that:

From a preliminary assessment of the current value of the expected debt-free cash flows from the business, obtained on the basis of their discounting at a special (discussed below) discount rate, the amount of the enterprise's debt on loans taken by it even before the project was assessed should be subtracted;

Over the life of the project, the share of its debt financing (including through new loans) and the interest rate on loans (new) do not change compared to the moment the project was assessed - an assumption that may actually turn out to be too rough.

According to the weighted average cost of capital method, the discount rate for discounting without debt cash flows is the minimum required rate of return per unit (ruble, dollar) of mixed (equity and debt) project financing.

In terms of the project’s own financing, this minimum required rate of return from each own penny (cent), ruble (dollar) of the specified mixed financing represents the restoration lost income from not using a unit of own funds to invest in an investment alternative with comparable risks. .

In other words, the minimum required rate of return from the share of own financing of a unit of business value is equal to the discount rate for [assessing the change in] the investor’s own capital, determined according to the most adequate option in a particular situation from among those described above. The minimum required rate of return from each borrowed penny (cent), ruble (dollar) of mixed business financing is equal to the cost of the debt taken, reflected by the interest rate on a specific loan agreement concluded by the enterprise in the interests of its business (in the case of concluding several loan agreements - the average interest rate on them weighted by the volume of these loan agreements) minus the tax savings on profits per unit of debt financing.

For calculation purposes, it is permissible, instead of the interest rate on credit agreements already concluded in the interests of the business in question (at least potentially), to use the interest rate expected on credit agreements that are actually concluded in the interests of business development.

The noted tax savings are ensured by the fact that the legislation allows reducing taxable profit on interest payments on long-term (more than a year) loans - provided that the interest rate on them is not higher than the refinancing rate of the Central Bank of the Russian Federation by more than three percentage points. Numerically, therefore, the discount rate for discounting expected business cash flows without debt (aka the weighted average cost of capital) is set as follows:

i svk= i x d ck+i x d zk x (1-h),If i kp? i Central Bank +0,03

i svk= i x d ck+(i Central Bank +0,03) x

d zk X (1-h) +[ i cr- (i Central Bank +0,03)] ,

Ifi kp? i Central Bank +0,03) x d zk ,

if i cr>i Central Bank +0,03

where i is the discount rate for (assessing changes in) the investor’s equity;

d CK, d 3K - respectively, the shares of own and borrowed financing of the project under consideration;

i Central Bank- refinancing rate of the Central Bank of the Russian Federation;

h - profit tax rate (including other taxes levied on profits);

icr - interest rate on credit agreements concluded or planned during the project.

In the case of several credit agreements, the discount rate is determined as follows:

where I kpj is the interest rate on the j-th loan agreement;

j - 1,..., M - numbers of credit agreements;

V kpj - volumes of j credit agreements.

For particularly long-term businesses with a useful life of about 20-25 years, in the formula for a variable weighted average cost of capital (a variable rate for discounting without debt cash flows), it is permissible to provide for instability over time in the cost of borrowed capital in the form of a rate on future loans. If the company being valued widely uses foreign borrowings, the variable rate i kpt can be entered into the specified formula at the level of the predicted and actual LIBOR rate for the corresponding period t.

If during the useful life of especially long-term projects two or three long periods can be distinguished, during which the rates i and i kpt will in one case be significantly different and in the other case still relatively constant within these two or three periods, then for the indicated periods It may be recommended to evaluate your variable discount rates using the weighted average cost of capital formula and apply for discounting without debt cash flows for years included in the later (second or third) allocated periods of the useful life, rates i svk, which would represent average values ​​( ascending) from the rate for the current long period and the rates for previous allocated long periods of the life of the business.

Considering that, in relation to particularly long-term investment projects (businesses), the discount rate equal to the weighted average cost of capital may change from one selected long period within the useful life of the project to another such period, not only due to the variability of the loan rate, but also due to changes in the individual discount rate i for the company's equity (due to the volatility over time of the basic nominal risk-free interest rate, which, in turn, is often reflected in the yield of government bonds), general formula for the variable weighted average cost of capital of the investing company takes the form:

where T is the number of a standard (equal to others) long period within the useful life period T of a particularly durable project;

T=1,..., n/L, L - the number of specified standard long periods in the period T;

R t is the projected average yield of government bonds over a standard long period equal to term T;

D - premium for project risks (discussed in the section on the discount rate for equity capital);

d CKt and d ЗКt are the shares of own and debt financing of the business in question, respectively, expected in periods T;

h t is the profit tax rate expected for a standard long period t.

We emphasize that when using non-debt cash flows (DC BDt), as well as the weighted average cost of capital as a rate for discounting it, the residual value of the business, equal to the predicted value SC* of the equity capital of the enterprise carrying it out (i.e. its price C), can be determined (without taking into account excess assets) only after the amount of discounted non-debt cash flows expected from the business (representing in this case an estimate of the value of all capital invested in the enterprise by at this moment) the debt (borrowed capital of the ZK) of the business enterprise that it has at the time of assessment will be deducted:

2. Discounted Cash Flow Method

The discounted cash flow (DCF) method is more complex, detailed and allows you to evaluate an object in case of receiving unstable cash flows from it, modeling the characteristic features of their receipt.

The DCF method is used when:

Future cash flows are expected to differ significantly from current ones;

Data is available to justify the size of future cash flows from real estate;

Income and expense flows are seasonal;

The property being assessed is a large multifunctional commercial facility;

The property is under construction or has just been built and commissioned: (or put into operation).

The discounted cash flow method is the most universal method for determining the present value of future cash flows. Cash flows may change arbitrarily, be uneven and have a high level of risk. This is due to the specifics of such a concept as real estate. Real estate is acquired by the investor in the main isoport of shared benefits in the future. An investor views a property as a bundle of future benefits and evaluates its attractiveness in terms of how the monetary value of those future benefits compares to the price at which the property can be purchased.

The DCF method estimates the value of real estate based on the present value of income, consisting of projected cash flows and residual value.

Calculation algorithm for the DCF method.

1. Determination of the forecast period.

Determining the forecast period depends on the amount of information sufficient for long-term forecasts. A carefully executed forecast allows you to predict the nature of changes in cash flows for a longer period.

In international assessment practice, the average forecast period is 510 years; for Russia, the typical value will be a period of 35 years. This is a realistic period for which a reasonable forecast can be made.

2. Forecasting the magnitude of cash flows from a real estate asset for each forecast year.

Forecasting cash flow amounts, including reversion, requires:

· thorough analysis based on financial statements submitted by the customer on income and expenses from the property in a retrospective period;

· studying the current state of the real estate market and the dynamics of changes in its main characteristics;

· forecast of income and expenses based on the reconstructed income statement.

When valuing real estate using the DCF method, several types of income from the property are calculated:

1) potential gross income;

2) actual gross income;

3) net operating income;

4) cash flow before taxes;

5) cash flow after taxes.

After-tax cash flow is the pre-tax cash flow minus the property owner's income tax payments. In practice, Russian appraisers discount income instead of cash flows:

· CHOD (indicating that the property is accepted as not burdened with debt obligations),

· net cash flow minus operating costs, land tax and reconstruction,

· taxable income.

Features of calculating cash flow when using the method.

· Property tax (real estate tax), consisting of land tax and property tax, must be deducted from actual gross income as part of operating expenses.

· Economic and tax depreciation is not a real cash payment, so taking depreciation into account when forecasting income is unnecessary.

· Loan servicing payments (interest payments and debt repayments) must be deducted from net operating income if the investment value of the property (for a specific investor) is estimated. When assessing the market value of a property, you do not need to read loan servicing payments.

· Business expenses of the property owner must be deducted from actual gross income if they are aimed at maintaining the necessary characteristics of the property.

Thus:

DVD = PVD - Losses from vacancy and during collection rent+ Other income,

CHOD = DVD - OR - Business expenses of the owner of real estate related to real estate,

Cash flow before taxes = NPV - Capital investments - Loan servicing + Loan growth.

Cash flow for real estate after taxes =

Pre-Tax Cash Flow - Income tax payments made by the property owner.

3. Calculation of the cost of reversion.

Reversion is the residual value of an object when the income stream ceases.

The cost of reversion can be predicted using:

1) assigning a sales price based on an analysis of the current state of the market, monitoring the cost of similar objects and assumptions regarding the future state of the object;

2) making assumptions regarding changes in the value of real estate during the ownership period;

3) capitalization of income for the year following the year of the end of the forecast period, using an independently calculated capitalization rate.

4. Determining the discount rate.

Discount rate is the interest rate used to calculate the present value of a sum of money received or paid in the future.

The discount rate reflects the risk-return relationship, as well as the various types of risk inherent in the property.

The capitalization rate is the rate used to reduce a stream of income to a single amount of value. However, in our opinion, this definition gives an understanding of the mathematical essence of this indicator. From an economic point of view, the capitalization ratio reflects the investor's rate of return.

Theoretically, the discount rate for a property should directly or indirectly take into account the following factors:

· compensation for risk-free, liquid investments;

· compensation for risk;

· compensation for low liquidity;

· compensation for investment management.

The relationship between nominal and real rates is expressed by Fisher's formulas.

The cash flows and the discount rate must correspond to each other and be calculated in the same way. The results of calculating the present value of future cash flows in nominal and real terms are the same.

In Western practice, the following methods are used to calculate the discount rate:

1) cumulative construction method;

2) a method for comparing alternative investments;

3) isolation method;

4) monitoring method.

The cumulative construction method is based on the premise that the discount rate is a function of risk and is calculated as the sum of all risks inherent in each specific property.

Discount rate = Risk-free rate + Risk premium.

The risk premium is calculated by summing up the risk values ​​inherent in a given property.

The method of comparing alternative investments is most often used when calculating the investment value of a property. The discount rate can be taken as follows:

b the return required by the investor (set by the investor);

b the expected profitability of alternative projects and financial instruments available to the investor.

The allocation method - the discount rate, as a compound interest rate, is calculated based on data on completed transactions with similar objects on the real estate market. This method is quite labor-intensive. The calculation mechanism consists of reconstructing assumptions about the value of future income and then comparing future cash flows with the initial investment (purchase price). In this case, the calculation will vary depending on the amount of initial information and the size of the rights being assessed.

The discount rate (as opposed to the capitalization rate) cannot be extracted directly from the sales data, since it cannot be calculated without identifying the buyer's expectations regarding future cash flows.

The best option for calculating the discount rate using the allocation method is to interview the buyer (investor) and find out what rate was used to determine the sales price and how the forecast of future cash flows was built. If the appraiser has fully received the information he is interested in, then he can calculate the internal rate of return (final return) of a similar object. He will be guided by the resulting value when determining the discount rate.

Although each property is unique, under certain assumptions it is possible to obtain discrete discount rates that are consistent with the overall accuracy of the forecast for future periods. However, it must be taken into account that purchase and sale transactions of such comparable objects should be selected as similar ones, the existing use of which is the best and most effective.

The usual algorithm for calculating the discount rate using the allocation method is as follows:

b modeling for each analogue object over a certain period of time according to the scenario of the best and most efficient use of income and expense streams;

b calculation of the rate of return on investment for the object;

b process the results obtained by any acceptable statistical or expert method in order to bring the characteristics of the analysis to the object being assessed.

ь monitoring method is based on regular market monitoring, tracking the main economic indicators of real estate investments based on transaction data. Such information needs to be compiled across different market segments and published regularly. Such data serves as a guide for the appraiser and allows for a qualitative comparison of the obtained calculated indicators with the market average, checking the validity of various types of assumptions.

If it is necessary to take into account the impact of risk on the amount of income, adjustments should be made to the discount rate when valuing individual real estate objects. If income is generated from two main sources (for example, from basic rent and interest premiums), one of which (basic rent) can be considered guaranteed and reliable, then one rate of income is applied to it, and the other source is discounted at a higher rate (so, the size percentage allowances depend on the volume of the tenant’s turnover and are an uncertain value). This technique allows you to take into account different degrees of risk when generating income from one property. By analogy, one can take into account the different degrees of risk of obtaining income from a property over the years.

Russian appraisers most often calculate the discount rate using the cumulative method (formula). This is explained by the greatest simplicity of calculating the discount rate using the cumulative construction method in the current conditions of the real estate market.

5. Calculation of the value of a property using the DCF method

Calculation of the value of a property using the DCF method is carried out using the formula:

The cost of reversion must be discounted (by the factor of the last forecast year) and added to the sum of the current values ​​of cash flows.

Thus, the value of the property is equal to the sum of the present value of the projected cash flows and the current value of the residual value (reversion).

Conclusion

The market valuation of a business largely depends on its prospects. When determining the market value of a business, only that part of the capital is taken into account that can generate income in one form or another in the future. At the same time, it is very important at what stage of business development the owner will begin to receive this income and what risk this is associated with. All these factors influencing business valuation can be taken into account using the discounted cash flow method.

Determining the value of a business using the discounted cash flow method is based on the assumption that a potential investor will not pay more for the business than the present value of future earnings from that business. The owner will not sell his business for less than the present value of projected future earnings. As a result of the interaction, the parties will come to an agreement on a market price equal to the present value of future income.

This valuation method is considered the most acceptable from the point of view of investment motives, since any investor who invests money in an operating enterprise ultimately buys not a set of assets consisting of buildings, structures, machinery, equipment, intangible assets, etc., but a stream of future income that allows him to recoup his investment, make a profit and increase his well-being. From this point of view, all enterprises, no matter what sectors of the economy they belong to, produce only one type of commodity product - money.

The discounted cash flow method can be used to value any existing business. However, there are situations when it objectively gives the most exact result market value of the enterprise.

The use of this method is most justified for evaluating enterprises that have a certain history of economic activity (preferably profitable) and are at the stage of growth or stable economic development. This method is less applicable to the valuation of enterprises suffering systematic losses (although a negative value of the business may be a fact for accepting management decisions). Reasonable caution should be exercised in using this method to evaluate new businesses, even promising ones. The lack of earnings history makes it difficult to objectively forecast a business's future cash flows.

Bibliography

1. “Expert”, No. 36, 1999, No. 16, 2003

2. Portal for specialists in the field of assessment - Access mode: http:// profiocenka.ru

3. Bocharov V.V. "Financial management. - St. Petersburg: Peter, 2007.

4. Savchuk V. P. Enterprise finance management. - M.: BINOM Laboratory of Knowledge, 2003. - 480 p.

5. Kovalev V.V. Introduction to financial management. - M.: Finance and Statistics, 2003. - 768 p.

6. Blokhina V. G. Investment analysis. - Rostov n/d: Phoenix, 2004. - 320 p.

7. Brigham Y., Erhardt M. Financial management. - 10th ed.: trans. from English - St. Petersburg. : Peter, 2005. - 960 p.

8. Valdaytsev S.V. Business valuation. Tutorial, M.: Prospekt, 2004.

9. Kovalev V.V. Financial analysis: Capital management. Choice of investments. Reporting analysis. - M.: Finance and Statistics, 1995. - 432 p.

10. Shcherbakov V. A., Shcherbakova N. A. “Assessment of the value of an enterprise (business)” - M.: Omega-L, 2006.

11. Sycheva G.I., Kolbachev E.B., Sychev V.A. Estimation of the value of an enterprise (business). Rostov n/d: Phoenix, 2004.

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Sources of information, methods for analyzing the organization's cash flows. Financial and economic characteristics of the flows of JSC "Pinsk Meat Processing Plant". Analysis of balance and efficiency of use of cash flows. Analysis of the organization's solvency.

Ratio analysis is an integral part of cash flow analysis. With its help, relative indicators characterizing flows are studied, and efficiency ratios for the use of the organization’s funds are also calculated.

First of all, ratio analysis of cash flows gives an idea of ​​the organization’s ability to generate the required amount of cash flows from current activities to maintain solvency. To assess the synchronicity of the formation of various types of cash flows, the liquidity ratio of cash flows for the year (K liquid) is calculated according to form No. 4 using the formula:

where PDP TD is the total amount of cash receipts from current activities;

ECT TD – the total amount of funds used for current activities.

As a general indicator, it is proposed to use the efficiency ratio of cash flows in the analyzed period (K EDP), which is determined by the formula:

,

Where

CCT – cash outflow for the period.

The efficiency of using funds is also assessed using various profitability ratios:

,

where ρ DP is the profitability ratio of positive cash flow for the period;

R P – net profit received for the period;

PDP – positive cash flow for the period.

To calculate the listed coefficients, we build table 4.34.

Table 4.34

Ratio analysis of cash flows of Torf-K LLC

End of table. 4.34

The decrease in the liquidity of operating (current) cash flows at Torf-K LLC was characterized by the fact that cash flow from current activities reached 60% of the previous year’s level. The decrease in the liquidity of cash flows by almost half over the analyzed period shows that the growth of cash flows occurs in a volume different from the growth of current liabilities, so the disproportion increases.

In 2008, there was a shortage of means of payment, as a result of which the cash flow efficiency ratios were negative. For every ruble of funds spent, the deficit was 71 kopecks (in 2007, the cash deficit was less - 56 kopecks).

The efficiency of using funds is also determined by the return on funds ratios. In both 2007 and 2008, these indicators were negative, and by 2008 the return on cash ratio decreased by 17.26%.

Cash flow profitability ratios can be calculated using both the organization's net profit and other profit indicators (profit from sales, profit before taxes, etc.), and instead of a positive cash flow indicator, a negative cash flow indicator can be used.

An important point in the analysis of cash flows is the assessment of their balance over time, that is, deviations of multidirectional cash flows in separate time intervals. In this case, we must proceed from the criterion of minimizing possible deviations (fluctuations) in the values ​​of inflow and outflow of funds.

To establish the degree of balance of cash flows for the analyzed period, the correlation coefficient of positive and negative cash flows is used, which is determined by the formula:

.

Moreover, when calculating this coefficient, intermediate calculations are used according to the following formulas:

,

,

,

where r is the correlation coefficient of positive and negative cash flows in the analyzed period;

xi is the amount of positive cash flow;

yi is the amount of negative cash flow;

x is the average cash inflow for the time interval;

y is the average amount of cash outflow for the time interval;

n is the number of time intervals in the analyzed period.

Let's calculate the correlation coefficient according to the data in Table 4.31. For convenience of calculations, we present the initial data, as well as the necessary intermediate calculation indicators, in Table 4.35.

Table 4.35

Total 2008

Using the data from table. 4.35 and the above formulas, we determine the value of the cash flow correlation coefficients for 2 years:

The found value of the correlation coefficients is quite close to unity, which indicates a small spread of fluctuations between the values ​​of positive and negative cash flows. In 2008, there is a greater approximation of the coefficient to one, therefore, in 2008, there is less risk of an insolvency situation (during periods when the outflow of funds exceeds their inflow) and excess money supply, indicating the lost benefit of placing excess funds (during periods when the inflow of funds exceeds funds over their outflow).

When analyzing an enterprise's cash flow, it is also necessary to assess the sufficiency of funds, which is the main condition for the financial well-being of the organization. The absence of a minimum cash reserve indicates serious financial difficulties. The excess amount of funds leads to the fact that Torf-K LLC may suffer losses associated with inflation, and opportunities for profitable placement and receipt of additional income are missed.

,

Where The method of assessing the adequacy of funds is to determine the duration of the turnover period. The formula used for this is: IN

- turnover period, in days; DS

- average cash balances; Ndc

- cash turnover for the period; D

- duration of turnover (30 days).

Table 4.36

Analysis of the duration of the company's cash turnover

for 2007-2008

From the data in table. 4.36 shows that the period of cash turnover during 2007 ranges from 0.98 to 32.39 days, in 2008 - from 1.65 to 52.41 days. In other words, from the moment money is received in the organization's current account or cash desk until the moment it is withdrawn, an average of 17 days a month passes in 2007, in 2008 - 27 days. It can be said that the fastest implementation of transactions with funds, which are associated with both the purchase and sale of goods, was observed in 2007, since no more than 14 days passed from the moment the money arrived in the company’s accounts until the moment it was withdrawn. When examining transactions by month, it is clear that in June 2007, as well as in February-March 2008, there was a slowdown in cash turnover. The maximum values ​​of turnover periods in June 2007 were 32.39, and in February and March 2008, 52.41 and 51.78, respectively. However, this may indicate insufficient funds for the enterprise, which is very dangerous if there is a significant amount of accounts payable. Any serious delay in payment can throw the company out of financial balance.

For clarity of fluctuations in cash turnover during 2007-2008. Let's build a graph (Fig. 4.15).

Rice. 4.15. Fluctuations in cash turnover for 2007-2008.

The period of cash turnover is far from uniform. In 2007, fluctuations in turnover periods are small, reaching an average of 17 days. In 2008, there was a large jump in changes in the periods of cash turnover in February and March on the current account and in the cash register. Since July 2008, there has been a smooth increase in the turnover period. The analysis showed that the company Torf-K LLC needs further regulation of cash flows in order to optimize cash flows.

In the process of conducting ratio analysis of cash flows, special attention is paid to factor analysis, that is, quantitative measurement of the influence of various objective and subjective factors that have a direct or indirect impact on profitability and the efficiency of using the organization’s funds in the analyzed period. Factor analysis (direct and inverse, deterministic and stochastic) is carried out using various techniques for modeling the original two-factor multiple systems (expansion, lengthening, contraction, optimization, etc.).

One of the stages of factor analysis of cash flows is the calculation of the influence of factors on changes in the value of the profitability ratio of positive cash flow for current activities (
), determined by the formula:

,

Where - revenue from sales;

PDP TD – positive cash flow from current activities.

By modeling this cash inflow profitability ratio, taken as the initial factor system, using the techniques of expansion, lengthening and contraction, one can obtain the final six-factor system:

y = ×x 5 ×x 6 ×x 7 ×x 8:

Where - revenue from sales;

PDP TD – positive cash flow from current activities;

N – sales revenue;

– profitability of sales;

– the average value of balances of current assets;

– the average balance of short-term monetary liabilities;

– net cash flow from current activities for the period;

M – material expenses for the period;

– labor costs for the period, taking into account social contributions;

A M – expenses in connection with depreciation of property for the period;

Pr – other expenses for ordinary activities for the period;

– material intensity of sales (x 1);

– salary intensity of sales (x 2);

– depreciation sales capacity (x 3);

– other sales consumption (x 4);

– turnover ratio of current assets (x 5);

– coefficient of coverage of short-term monetary liabilities by current assets (current liquidity) (x 6);

– coefficient of generation of net cash flow by attracted funds for current activities (x 7);

– the share of net cash flow in the total volume of positive cash flow from current activities (x 8).

The initial data and calculation of the influence of eight factors (x 1, x 2, x 3, x 4, x 5, x 6, x 7, x 8) on the resultant indicator produced by the method of chain substitutions are presented in table. 4.37.

Table 4.37

Calculation of the influence of factors on the profitability of the positive cash flow of Torf-K LLC for 2007-2008.

End of table. 4.37

Calculation of the influence of factors on changes in the profitability of positive cash flow for the current activities of Torf-K LLC in 2008:

The cumulative influence of factors on changes in the profitability of positive cash flow for current activities:

Impact of sales material intensity:

Impact of salary intensity of sales:

Impact of sales depreciation capacity:

Impact of other sales consumption:

Impact of the current assets turnover ratio:

The influence of the current assets coverage ratio for short-term monetary liabilities:

Impact of the net cash flow generation ratio from borrowed funds for current activities:

The impact of the share of net cash flow in the total volume of positive cash flow from current activities:

The total influence of factors on the performance indicator is:

4,1828-4,0567+0,1120+0,0155-0,1977-14,2335+14,1520-0,3014 = -0,3271%,

This value corresponds to the overall absolute increase in the effective profitability indicator of positive cash flow for current activities.

As can be seen from the calculations, the influence of the factors included in the analytical model was both positive and negative. The factors that had the greatest positive impact on the growth of profitability of positive cash flow from current activities in 2008 compared to 2007 include: reduction in material intensity, depreciation capacity and other consumption intensity (4.1828%, 0.1120% and 0.0155 %, respectively) and acceleration of the generation of net cash flow with raised funds (14.1520%).

At the same time, there was a negative impact of factors: an increase in salary intensity by 4.0567%, a decrease in the speed of current assets (-0.1977%), a decrease in overall liquidity (-14.2335%), as well as a decrease in the share of net cash flow for the current activities in the total amount of cash receipts (-0.3014%).

Eliminating the impact of identified negative factors in the activities of Torf-K LLC will allow the organization to increase the profitability of cash flow and the efficiency of business activities in general.

• What's wrong with an income statement?
• How a Cash Flow Budget Helps the CEO
• What does a cash flow budget include?
• What data should budgets be based on for short-term and long-term periods?
• How to predict the receipt and expenditure of funds

The financial and economic activities of a company can be expressed through cash flow, which includes income and expenses. Choosing a decision regarding the investment of funds is the most important stage in the work of each company. In order to successfully use the funds raised and obtain the greatest return on invested capital, future cash flows related to the implementation of ongoing transactions, agreed forecasts and projects should be carefully analyzed.

It is believed that the most complete assessment of a company's performance is provided by the profit and loss statement. However, it does not meet the needs of the head of the enterprise: after all, this report is compiled on an accrual basis - expenses are recorded in it only after they are written off in, and not when they need to be carried out. This means that even a perfectly prepared report will reflect not those payments that the company has made or intends to make, but conditional ones economic results. In order for you to have a clear picture of the organization’s financial activities, you need reporting:

• demonstrating how the enterprise is provided with cash at any given time;
• free from any influence of legislative and accounting requirements (that is, intended only for the head of the enterprise);
• covering, as far as possible, all aspects of the company's work.

These conditions are best met by a cash flow budget.

A cash flow budget is a table that shows the company's cash inflows and outflows. It can be compiled for any period - from several weeks to several years. There are two common methods for preparing this document: direct and indirect. When using the direct method, operating cash flows are allocated to income and expense items (for example, sales receipts, salaries, taxes). The indirect method assumes that operating flows are determined based on net income adjusted for depreciation and changes in working capital.

In some cases, it is easier to use the indirect method, but the budget compiled using it is inconvenient for analysis. Therefore, cash flow is almost always calculated using the direct method.

• Optimizing the organization's capital structure: how not to lose balance

What does cash flow management provide?

Successful management of enterprise cash flows:

• must ensure compliance with the financial balance of the company at each stage of its development. Growth rates and financial stability primarily depend on the extent to which cash flow options are synchronized in volume and time. A high degree of such synchronization allows for significant acceleration in the implementation of strategic development tasks of the company;
• helps reduce the company's need for credit resources. Through active management of financial flows, it is possible to achieve a more optimal and economical use of one’s funds and reduce the company’s dependence on attracting credit resources;
• helps reduce the risk of insolvency.

Types of cash flows

The main cash flows of an enterprise are usually grouped according to 8 main characteristics:

According to the scale of servicing the economic process:

• for the company in general;
• for each individual separate division;
• for various economic transactions.

By type of economic activity:

• operating cash flows (production, main activities);
• investment;
• financial.

In the direction of cash flow:

• the receipt of money is considered a positive cash flow;
• spending money is a negative flow of money.

According to the volume calculation method:

• gross cash flow – all cash flows in their totality;
• net cash flow (NCF) is the difference between income and expense financial flows in the period under study. It is a key result of the company’s functioning and largely determines the financial balance and the rate of increase in the company’s market price.

By level of sufficiency:

• excess – cash flow during which the amount of money received is much greater than the company’s actual need for its intended use;
• deficit - cash flow during which revenue receipts are much less than the actual needs of the company for their intended use.

According to the time estimation method:

• real;
• future.

According to the continuity of formation in the period under review:

• discrete cash flow - income or expense due to one-time economic transactions of the company in the period of time being studied;
• regular - income receipt or expenditure use of money for various economic transactions carried out during the time period being studied continuously over separate time intervals of such a period.

According to the stability of time intervals:

• with equal time intervals within the study period - annuity (interest accrued on loan obligations on the same date);
• with varying time intervals within the study period (leasing payments).

The amount of cash flows: how to calculate

The total cash flow of the company is determined by the formula NPV = NPV (OPD) + NPV (IND) + NPV (FD), where

• NPV (OPD) - net cash flow related to the operating area;
• NPV (IND) - the amount of NPV related to investment direction;
• NPV (FD) - the amount of NPV related to the financial direction.

Due to the fact that the main activity of the company is the main source of profit, it is clear that the main source of money is the PDP (OPD).

Investment activity is usually driven primarily by short-term outflows financial resources needed to purchase equipment, know-how, etc. At the same time, there is also an influx of money from this type of activity in the form of receiving dividends and interest on long-term securities, etc.

To carry out the analysis, we will calculate the cash flow for the investment direction using the formula NDP(IND) = B(OS) + B(NMAC) + B(DFV) + B(AKV) + DVDP - OSPR + + DNCS - NMAKP - DFAP - AKVP , Where

• B (OS) - revenue from fixed assets;
• B (NMAC) - proceeds from the sale of intangible assets of the enterprise;
• B (DFV) - receipts for the sale of long-term financial assets of the enterprise;
• B (AKV) - income received by the company for the sale of previously repurchased shares of the company;
• DVDP - dividend and interest payments of the enterprise;
• OSPR - the total amount of acquired fixed assets;
• ANKS - dynamics of the balance of work in progress;
• NMAKP - volume of purchase of intangible assets;
• DFAP - volume of purchase of long-term financial assets;
• AKVP is the total amount of the company's own shares repurchased.

Net cash flow in the financial area of ​​activity characterizes income receipts and the use of funds in the field of external engagements.

To find out the net cash flow, the formula used is as follows: NPV(FD) = PRSC + DKZ + KKZ + BCF - PLDKR - PLKKZ - DVDV, where

• PRSC - additional external financing (financial proceeds from the issue of shares and other equity instruments, additional investments of company owners);
• DKZ - the total indicator of additionally attracted long-term credit resources;
• KKZ - the total indicator of additionally attracted short-term credit resources;
• BCF - total receipts in the form of irrevocable target financing of the company;
• PLDKR - total payments of the principal part of the debt on existing long-term loan obligations;
• PLKKZ - total payments of the principal part of the debt on existing short-term loan obligations;
• DVDV - dividends for the company's shareholders.

Why do you need cash flow assessment?

The primary task of a detailed analysis of money flows is to find the sources of excess (shortage) financial resources, determine their sources and methods of spending.

Based on the results of studying cash flows, you can get answers to the following important questions:

1. What is the volume, what are the sources of money and what are the main directions of its use?
2. Can a company, during its operating activities, achieve a situation where income cash flow exceeds expenses, and to what extent is such an excess considered stable?
3. Can the company pay its current obligations?
4. Will the profit received by the company be enough to satisfy its current cash needs?
5. Will the company have enough cash reserves for investment activity?
6. How can you explain the difference between a company's profit margin and the amount of money it makes?

Cash flow analysis

The solvency and liquidity of a company often correspond to the company’s current financial turnover. In this regard, to assess the financial condition of a company, it is necessary to analyze the movement of cash flows, which is done on the basis of reports, for the preparation of which a direct or indirect method is used.

1. Indirect method of preparing a cash flow statement. In a report based on this methodology, it is possible to concentrate data on the company’s funds, reflect the criteria available in the estimate of income and expenses and which it has after paying for the necessary factors of production to start a new reproduction cycle. Information about the influx of financial resources is taken from the balance sheet and financial performance report. Only certain cash flow indicators are calculated based on information about the actual volume:

1. Depreciation.
2. Income from the sale of part of your shares and bonds.
3. Accrual and payment of dividends.
4. Obtaining credit resources and repaying corresponding obligations.
5. Investments in fixed assets.
6. Intangible assets.
7. Financial investments of temporarily free money.
8. Increase in working capital reserves.
9. Sale of fixed assets, intangible assets and securities.

The main advantage of the method is that it helps to identify the mutual dependence of the financial result on the dynamics of the amount of financial resources. In the course of adjusting net profit (or net loss), it is possible to determine the actual receipt (expense) of money.

2. Direct method of preparing a cash flow statement. This technique involves comparing the absolute values ​​of income receipts and the use of financial resources. For example, income from clients will be reflected in the amounts in the cash register in various bank accounts, as well as money sent to their business partners and employees of the company. The advantage of this approach is that it helps to assess the total amount of income and expenses, to find out the items that generate the most significant cash flows of the company. However, this method does not allow us to identify the relationship between the final financial result and the dynamics of money in corporate accounts.

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What does a cash flow budget include and where do you get the data to compile it?

Dmitry Ryabykh, CEO group of enterprises "Alt-Invest", Moscow

The cash flow budget consists of three blocks:

• “Operating activities” (everything related to the current activities of the company is reflected here);
• “Investment activity” (investments in fixed assets and other long-term investments, income from the sale of assets are recorded);
• “Financial activities” (receipts and payments related to financing are taken into account, except for interest on loans, which are traditionally classified as operating flows).

What conclusions can be drawn from the data in the table? In May, the budget is balanced and cash balances increase, providing either a liquidity buffer or funds to pay expected expenses. This table will also help you understand the overall cost structure of the company. However, to make serious management decisions you will need more detailed information. Therefore, the standard structure needs to be detailed. For example, you can reflect sales revenues broken down by business lines, groups of products (services), or even individual products. You should also highlight the five to ten most significant articles running costs and constantly monitor the volume of related expenses. And investments need to be reflected, distributing them either by type of fixed assets, or by business areas or projects.

Practice shows that the higher the detail of the report, the more often problems arise with its analysis. At some point, the numbers in each line become insufficiently stable and the magnitude of the deviations grows. Such a model turns out to be statistically unreliable, and activity cannot be predicted on its basis. In addition, overly detailed models are very difficult to maintain; It is also not easy to compare their data with financial statements. That is, working with this model is inconvenient, and its regular updating is expensive.

An actual budget is best based on management reporting. However, you should not neglect the financial statements data - after all, they contain the most complete and up-to-date information about all the company’s operations. Therefore, before developing a cash flow budget, you need to determine how accurately the data in this document must correspond to the information in the financial statements. You can, for example, follow these rules.

1. The cash flow budget will be based on accounting data, but it is not necessary to accurately transfer all accounting information here. This budget does not need to be as detailed as an accounting document.
2. When processing accounting data, one should strive to convey the economic essence of financial transactions, neglecting unimportant details (for example, nuances regarding the allocation of costs).
3. It is necessary to ensure that the final figures coincide with the turnover in the company’s current account. And here even the little things are important: knowing the details will allow you to control the correctness of budgeting, paying attention to errors in time.

Forecasting working capital. The principle for describing working capital should be determined by the planning horizon for which the budget is used.

1. For short-term forecasts (several weeks, one or two months), it is better to use a direct description of payments, indicating both the payment amounts and their schedules in relation to any income and expenses of the company. This is achieved by taking into account each transaction with a description of the expected payment schedule under the contract and parameters for shipment or performance of work.
2. For long-term forecasts (for example, to build a five-year development plan for an organization), the payment schedule must be drawn up approximately, taking into account the expected turnover parameters.
3. When preparing the annual budget, you can use a mixed approach, when some items are forecasted in full (direct method), and the bulk of payments are calculated based on turnover (indirect method).

This main principle budgeting. The longer the forecast is prepared for, the less it should rely on specific figures provided by financiers, and the more it should be based on approximate calculations.

Planning tax payments. In cases where expected taxes are known (and this happens with a planning horizon of one or two months or when assessing past results), it is better to indicate their exact amounts in the budget. When planning tax deductions for a longer period, you will have to move on to approximate estimates of the amounts of payments, calculating them using approximate accounting indicators. For example, when preparing to open a new division, do not try to calculate the exact amount of taxes from the salary of each employee - especially since their amount will change throughout the year (since social taxes are reduced after reaching the accumulated amount of payments); It is enough to use the effective rate, which will allow you to estimate the approximate amount of payments. The same should be done when planning payments for other taxes.

What is cash flow discounting

Discounted cash flow (DCF) is a reduction of the cost of future (predicted) financial payments to the current point in time. The discounted cash flow method is based on the key economic law of diminishing value of funds, that is, in the future, money will lose its own value of cash flow in comparison with the current one. In this regard, it is necessary to select the current moment of assessment as a reference point and subsequently bring future cash receipts (profits/losses) to the current time. For this purpose, a discount factor is used.

This factor is calculated to reduce the future cash flow to the present value by multiplying the discount factor by the payment streams. Formula for determining the coefficient: Kd=1/(1+r)i, where

• r – discount rate;
• i – number of the time period.

• DCF (Discounted Cash Flow) – discounted cash flow;
• CFi (Cash Flow) – cash flow in time period I;
• r – discount rate (rate of return);
• n is the number of time periods for which cash flows appear.

The most important component in the above formula is the discount rate. It demonstrates what rate of return an investor should expect when investing in any investment project. This rate is based on a large number of factors that depend on the object of evaluation and contain an inflation component, profitability on risk-free transactions, an additional rate of return for risky actions, a refinancing rate, the weighted average cost of capital, interest on bank deposits, etc.

• Financial analysis for a non-financier: what to pay attention to first

A practitioner tells

Ekaterina Kalikina, Financial Director of Grant Thornton, Moscow

The forecast of cash flows from operating activities is most often made based on the planned volume of product sales (but can also be calculated based on the planned net profit). Here are the calculations you need to make.

Receipts of money. You can determine the amount of cash receipts in two ways.

1. Based on the planned receivables repayment ratio. The planned amount of revenue is calculated as follows: PDSp = ORpn + (ORpk Î KI) + NOpr + Av, where

• PDSP – planned revenue from sales of products in the planning period;
• ORpn – planned volume of product sales for cash;
• ORpk – volume of product sales on credit in the planning period;
• CI – planned receivables repayment ratio;
• NOpr - the amount of the previously outstanding balance of receivables subject to payment as planned;
• Av is the planned amount of cash receipts in the form of advances from customers.

2. Based on accounts receivable turnover. First you need to determine the planned accounts receivable at the end of the planning period using the formula DBkg = 2 Î SrOBDB: 365 days Î OP – DBng, where

• DBkg – planned receivables at the end of the planning period;
• SrOBDB – average annual turnover of accounts receivable;
• OR – planned volume of product sales;
• DBng – accounts receivable at the end of the plan year.

Then you should calculate the planned amount of cash receipts from operating activities: PDSp = DBng + ORpn + ORpk – DBkg + + NOpr + Av.

Remember that the volume of cash receipts of the company from operating activities directly depends on the terms of the provision of trade credit by the buyer. Therefore, when forecasting cash receipts, it is necessary to take into account measures to change the credit policy of the enterprise.

Expenses. You can determine the amount of cash expenses using the formula: RDSp = OZp + NDd + NPp – AOp, where

• RDSp is the planned amount of cash expenditures as part of operating activities in the period;
• OZp is the planned amount of operating costs for production and sales of products;
• AIT – the planned amount of taxes and fees paid from income;
• NPP – the planned amount of taxes paid from profits;
• АОп – the planned amount of depreciation deductions from fixed assets and intangible assets.

The first indicator (OZp) is calculated as follows: OZp = ∑(PZni + OPZni) Î OPni + ∑(ZPni Î OPni) + + OXZn, where

• PZni is the planned amount of direct costs for the production of a unit of production;
• OPPni – the planned amount of overhead costs for the production of a unit of product;
• OPni – planned volume of production of specific types of products in physical terms;
• ЗРni – planned amount of costs for selling a unit of production;
• ORni – planned volume of sales of specific types of products in physical terms;
• ОХЗn – the planned amount of general business expenses of the enterprise (administrative and managerial expenses for the enterprise as a whole).

The calculation of the second indicator (VAT) is made based on the planned volume of sales of certain types of products and the corresponding rates of value added tax, excise tax and other similar duties. The payment schedule is drawn up based on the established deadlines for paying tax contributions.

The third indicator (NPp) can be calculated as follows: NPp = (VPp Î NP) + PNPp, where

• GPP is the planned amount of gross profit of the enterprise, which is ensured through operating activities;
• NP – profit tax rate (in%);
• PNPp - the amount of other taxes and fees paid by the organization in the corresponding period at the expense of profits.

Cash flow optimization

To optimize the cash flow of a project, the company strives to achieve a balance between income and expenses. Deficit and excess cash flows have a negative impact on a company's financial performance.

The negative results of the deficit are expressed in a decrease in liquidity and the level of solvency of the company, an increase in specific gravity delays in loan payments, failure to meet deadlines for salary transfers (with a concomitant decrease in employee productivity), an increase in the duration of the financial cycle, and ultimately a decrease in the profitability of spending the company’s equity capital and assets.

The downside of excess is the loss of the actual value of financial resources that have not been used for some time during inflation, the loss of possible income from the unused share of financial assets in the area of ​​short-term investment, which ultimately also negatively affects the degree of profitability of assets and negatively affects the equity capital and cash flow of the company.

A reduction in the level of payments of financial resources in the short term can be achieved:

1. By using a float to slow down the collection of your payment documentation.
2. By increasing, as agreed with suppliers, the time interval for which a consumer loan is provided.
3. By replacing the purchase of long-term assets that require renewal with their rental (using leasing); in the course of restructuring the portfolio of its credit obligations through the transfer of their short-term part to long-term.

The system of accelerating (or slowing down) the payment turnover as a result of solving the problem of ensuring a balance of the amount of the deficit cash flow in the short-term period of time (and, therefore, increasing the indicator of the company’s full solvency) raises certain questions related to the deficit that the cash flow has in future periods. In this regard, simultaneously with the activation of the mechanism of such a system, measures should be developed to ensure the balance of such a flow in the long term.

Increasing the volume of cash receipts as part of the implementation of the company's strategy can be achieved by:

• attracting key investors to increase the amount of equity capital;
• additional issue of shares;
• attracted long-term loans;
• sale of individual (or all) financial instruments for subsequent investment;
• sale (or lease) of unused fixed assets.

It will be possible to reduce the amount of money outflow in the long term with the help of such actions.

1. Reducing the volume and list of investment projects being implemented.
2. Stopping spending on capital investments.
3. Reducing the company's fixed costs.

To optimize positive cash flow, you need to use several methods due to an increase in the company's investment activity. To do this, perform the following steps:

1. Expanded reproduction of non-current assets for operating activities is increasing in volume.
2. Provides accelerated formation of an investment project and more early start its implementation.
3. They diversify the company's current activities at the regional level.
4. Actively form a portfolio of financial investments.
5. Long-term financial loans are repaid ahead of schedule.

In a unified system for optimizing the company’s financial flows special place is assigned to ensuring balance in time intervals, which is due to the imbalance of opposite flows and leads to the emergence of some economic difficulties for the company.

The result of such an imbalance, even in the case of a high level of NPV formation, is low liquidity, which distinguishes the cash flow (as a result, a low indicator of the firm’s full solvency) at different periods of time. In the case of a fairly significant duration of such periods, the company faces real danger become bankrupt.

When optimizing cash flows, companies group them according to different criteria.

1. According to the level of “neutralizability” (a concept meaning that a cash flow of a particular type is ready to change over time), cash flows are divided into those that can be changed and those that cannot be changed. An example of the first type of cash flow is considered to be leasing payments - a cash flow, the period of which can be established as part of the agreement of the parties. An example of the second type of financial flow are taxes and fees that should not be received in violation of deadlines.
2. According to the level of predictability, all cash flows are divided into not completely and completely predictable (completely unpredictable cash flows are not studied in the general system for their optimization).

The object of optimization is the expected cash flows, which may change over time. In the course of their optimization, two techniques are used - alignment and synchronization.

Equalization is designed to smooth out the volumes of financial flows within the intervals of the time period being studied. This optimization technique helps to some extent eliminate seasonal and cyclical fluctuations that affect cash flow, while at the same time allowing for optimization of average balances of financial resources and increasing liquidity. To evaluate the results of such a cash flow optimization technique, it is necessary to calculate the standard deviation or coefficient of variation, which will decrease during proper optimization.

Synchronization of money flows is based on the covariance of their two types. During synchronization, the level of correlation between these two flow options should be increased. This cash flow method can be assessed by calculating the correlation coefficient, which during optimization will tend to the “+1” mark.

The correlation coefficient of receipt and expenditure of money over time KKdp can be determined as follows:

• P p.o – expected probabilities of deviation of financial flows from their average indicator in the forecast period;
• PAPi – individual values ​​related to income cash flow in certain time periods of the forecast period;
• PDP is the average income cash flow in one time period of the forecast period;
• ODPi – individual values ​​related to expenditure cash flow in certain time periods of the forecast period;
• ECF – the average value of the expenditure financial flow in one time period of the forecast period;
• qPDP, qODP – standard deviation of the amounts of income and expenditure financial flows, respectively.

The final stage of optimization is compliance with all maximization conditions for the company’s NPV. If you increase such cash flow, this will help ensure an increase in the pace of financial development of the company within the framework of the principles of self-sufficiency, reduce the level of dependence of this development option on attracting external sources of money, and help ensure an increase in the total market price of the company.

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