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Converting Accrual Financial Statements Into Cash Flow

Financial statements and tax returns can be prepared on a cash or accrual basis. The difference in the two accounting methods is vast. Both methods have their advantages and disadvantages. Unfortunately, financial institution professionals often do not have a say in the type of accounting method the client will present to them.

Upcoming
Wednesday, February 26th, 2025
10:00 am - 12:00 pm
Presented by Jeffery Johnson
$299.00 or 1 Token

Includes: Live Access, 30 Days OnDemand Playback, Presenter Materials and Handouts

  • Accounting/Reporting
  • Auditing
  • Lending
  • Branch Manager
  • Consumer Lender/Retail Banker
  • Credit Analyst
  • Internal Auditor
  • Loan Closer
  • Loan Operations Manager/Specialist
  • Mortgage Lender
  • Senior Management
  • Training Manager
  • Trainer

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Financial statements prepared on an accrual basis will recognize all financial transactions regardless of the collection of cash at the point of sale or the payment of costs and expenses at the time the costs and expenses are incurred. The advantage of the accrual method is that the user will see all the accounting transactions in a given period, thus providing the opportunity to perform a thorough analysis of the entity. The disadvantage is that the accrual method does not indicate the amount of cash generated or used by the entity.

Financial statements prepared on the cash basis will recognize financial transactions when cash is collected from sales and paid out for costs and expenses. It is meant to present a more conservative view of an entity’s performance by ignoring transactions that do not generate cash or use cash. Since the cash basis only reflects cash transactions, there is no need to perform a cash flow analysis because the financial statements are on a cash basis already. The disadvantage is that the user of the financial statements will not see all the financial transactions an entity experienced over a time period.

So, what type of financial transaction should loan officers obtain? The answer is financial statements prepared on the accrual basis because it will reflect all financial transactions. Even though accrual financial statements do not display how much cash is generated or used over a period of time, it is best to obtain it because they can be converted into a cash basis financial statement, and that conversion process is cash flow analysis, which is the purpose of this course.

What You'll Learn

  • Obtain a good understanding of how to convert an accrual basis financial statement into cash flow
  • Know how to interpret and explain cash flow analysis to determine the debt repayment capability of the entity
  • Know the types of companies prone to utilize cash basis financial statements and why
  • Be able to compare various methods to calculate cash flow including the Uniform Cash Analysis (UCA) Method, EBITDA, and Traditional Methodologies, and their advantages/disadvantages
  • Know the rules of cash flow required to perform the conversion from accrual to cash
  • Be exposed to the Fast Cash Analysis method which can get you to the same results in less time
  • Know the questions to ask and the additional information required when a cash basis financial statement is received

Who Should Attend

This session is ideal for senior loan officers, senior credit officers, commercial loan officers, branch managers, credit analysts, loan review personnel, and consumer loan officers.

Jeffery Johnson

Instructor Bio

Jeffery W. Johnson started his career with SunTrust Bank in Atlanta as a Management Trainee and progressed to Vice President and Senior Lender of SouthTrust Bank and Senior Vice President and Commercial Banking Division Manager for Citizens Trust Bank of Atlanta.

Most of his career has been spent in Credit Administration, Lending, Business Development, Loan Review, Management and Training & Development. He has managed loan portfolios representing a cross section of loan types including: Large Corporate, High Net Worth Individual, Middle Market Companies, Small Business, Real Estate and Non-Profit Organizations.

Mr. Johnson is now a training professional in the financial industry by leading various seminars covering important topics relating to issues in financial institutions. He teaches actively for fifteen state banking associations in the United States, Risk Management Association (RMA) and individual financial institutions nationwide. He co-authored a training course entitled "Lending to Service and Other Professional Organizations" for RMA in 2001.

Mr. Johnson earned a B.A. Degree in Accounting from Morehouse College in Atlanta; a MBA in Finance from John Carroll University in University Heights, Ohio; Banking diploma from Prochnow School of Banking at the University of Wisconsin and a Graduate Certificate in Bank Management from the Wharton School of Business at the University of Pennsylvania.

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