budget-sec10-Cash Flow_6

budget-sec10-Cash Flow_6 - Cash Flow: William J. Ward, Jr.,...

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Unformatted text preview: Cash Flow: William J. Ward, Jr., MBA Why Is Cash Flow So Important?   Why do some successful business ventures fail in the first year?   What do they mean when they say the venture is under-funded?   What about a business that is under-capitalized?   Ever heard this phrase? Cash is king! Cash Flow William J. Ward, Jr., MBA Johns Hopkins University 2 Typical Projection   How much is the annual profit? Cash and Non-Cash Aspects Collected Billed $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 60,000 May $ 100,000 $ 100,000 $ 60,000 $ 100,000 $ 100,000 $ 60,000 July $ 100,000 $ 100,000 $ 60,000 August $ 100,000 $ 100,000 $ 60,000 September $ 100,000 $ 100,000 $ 60,000 October $ 100,000 $ 100,000 $ 60,000 November $ 100,000 $ 100,000 $ 60,000 December $ 100,000 $ 100,000 $ 60,000 Totals $1,200,000 $1,200,000 Conversion of profits to cash flow $ 60,000 April Some expenses are merely notational   $ 60,000 March Most expenses are cash   $ 60,000 $ 100,000 June $1.2M – $720K = $480,000 January February     Salary Payments $720,000 3 Cash and Non-Cash Aspects P&L 4 First-Year Cash-Flow Analysis Cash Alternate Billed $ 500,000 $500,000 Collected Salary Payments January $500,000 $ 60,000 February Net Revenue $ 60,000 March Operating Expenses $ 60,000 Depreciation Total Expense Profit 25,000 75,000 $ $ 300,000 200,000 $225,000 $275,000 Depreciation "Cash" Profit $ 100,000 $ 60,000 $ 100,000 $ 100,000 $ 60,000 $ 100,000 $ 100,000 $ 60,000 $ 100,000 $ 100,000 $ 60,000 $ 100,000 $ 100,000 $ 60,000 Totals 75,000 $ 60,000 $ 100,000 November $200,000 $ 100,000 September $300,000 $ 100,000 August 75,000 $ 100,000 July 100,000 $ 100,000 June 25,000 100,000 May $100,000 100,000 Supplies $100,000 25,000 Fringe Benefits 100,000 $ 100,000 December $ April October Salaries $ 60,000 $ 900,000 $ 600,000 $720,000 $ 60,000 $ 60,000 $275,000 5 6 1 Cash Flow: William J. Ward, Jr., MBA First-Year Cash-Flow Analysis Billed Collected Salary Payments January $ 60,000 February $ 60,000 Cash Flow Budgeting   How much cash flow is there in the first year of operation? Salary Payments Collected Borrowed Funds $ 60,000 April $ 100,000 May $ 100,000 $ 60,000 June $ 100,000 $ 60,000 July $ 100,000 $ 100,000 $ 60,000 August $ 100,000 $ 100,000 -  $ 60,000 $ 60,000 September $ 100,000 $ 100,000 $ 60,000 October $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 60,000 December $ 100,000 $ 100,000 $ 60,000 Totals $ 900,000 $ 600,000 -  $ 60,000 November -  $ 60,000 February $ 60,000 March $ 60,000 April $ 60,000 $600,000 revenue inflow May $ 60,000 June $ 60,000 July $ 100,000 $ 60,000 $ (40,000) $120,000 cash deficit August $ 100,000 $ 60,000 $ (40,000) September $ 100,000 $ 60,000 $ (40,000) $180,000 profit October $ 100,000 $ 60,000 $ $ 100,000 $ 60,000 $ (40,000) December $ 100,000 $ 60,000 $ (40,000) $ 600,000 $ 720,000 $ 120,000 $720,000 expense outflow $720,000 -  7 $ 360,000 How much cash flow is there in the first year of operation? (40,000) November Totals March January   -  $720,000 expense -  $600,000 revenue $120,000 borrowed -  -  Net = $0 8 Lecture Evaluation Please take a moment to evaluate this lecture. Your feedback is very important and will be used for future revisions. The Evaluation link is available on the lecture page. 9 2 ...
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This note was uploaded on 01/25/2012 for the course PH 551.603 taught by Professor / during the Spring '12 term at Johns Hopkins.

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