Basic Cash Flow Analysis

Determining the ability of an entity to generate cash flow is essential whenever the repayment of a loan will extend beyond one year. Cash flow analysis measures the ability of an entity to generate sufficient cash to operate the business successfully and have excess cash to service the annual debt payment requirements. Understanding how to calculate and interpret cash flow is essential for successful financial institution employees.

This course is designed to assist financial institution employees in calculating cash flow utilizing the Universal Cash Flow Analysis method (UCA), which is used often by financial institutions to determine the flow of cash into and out of a business entity. The course will start by defining cash flow and identifying potential sources and uses of cash and then illustrating how cash flow analysis is actually the process of converting an Accrual Basis financial statement into a Cash Basis financial statement. The Rules of Cash Flow will also be covered when determining cash flow generation from changes in asset, liability and capital accounts on the balance sheet over time. The highlight of the course will be the calculation of a full UCA from the beginning to the end.

Covered Topics:

  • Comparison of the Traditional Cash Flow Method (Net Income + Depreciation + Interest divided by Annual Debt Service) to the UCA model
  • The Rules of Cash Flow
  • Accrual Basis versus the Cash Basis of preparing financial statements and how cash flow analysis links the two together
  • How each amount on a Universal Cash Analysis is calculated and their meaning
  • A Fast Cash Analysis method which can achieve the same results in less time than utilizing the UCA method

Upon completion of this course, the participant will have a good understanding of how cash flow is calculated and more importantly, how to interpret its meaning.

Who Should Attend?

Senior Loan Officers, Senior Credit Officers, Commercial Loan Officers, Branch Managers, Credit Analyst, Loan Review Personnel, and Consumer Loan Officers all would benefit from this presentation.