Introduction to Cash Flow: Modelling and Forecasting

Overview

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Cash Flow can be calculated by two methods, Direct method and Indirect Method. However, the result will be same.

Further, there is difference between Cash Flow and Free Cash flow. Cash Flow is the net cash and cash equivalent that comes in and goes out of a company. Whereas, Free Cash Flow is the amount of cash generated through business operations after capital expenses and operating expenses are paid off.

Free cash flows are measured by two ways; Free Cash Flow to Firm and Free Cash Flow to Equity. Free cash flow to firm (FCFF) can be described as the cash that is available with the firm owners to pay off their investors, i.e. for both equity holders and lenders. Whereas, Free Cash flow to equity (FCFE) is the amount of free cash that can be distributed to equity shareholders only in the form of dividends or stock buy backs after all expenses, reinvestments, and debt repayments have been paid off.

Cash Budget and Cash Flow are two different concepts. Cash flows represents the actual flows during the past period. Cash Budget is a forecasting tool that tracks all cash receipts and cash payments of an enterprise during a period and helps in assessing working capital requirement

Syllabus

The course is structured in six modules, with each module catering to a separate domain. At the end of each module there will be 10 MCQ questions to test the progress of the learner. Scoring in MCQs at the end of each module will not influence the completion of the course. At the end of the 6th module, a ‘Final Test’ containing 30 MCQs will have to be taken by the learner.

The learner will be assumed to have completed the course if he/she scores at least 70% in the Final Evaluation alongwith 70% score in periodical assessment after completion of each Module.

Introduction:

* About the course

* Brief Objectives

Relevance ***

Module I : Modelling of Cash Flow

Introduction to Cash Flow Statement
Preparation of Operating Cash Flow
Preparation of Investing Cash Flow
Preparation of Financing Cash Flow
Key Learning
Assessment

**Module II : Modelling of Direct & Indirect methods of Cash Flow **

Preparation of Cash Flow Statement through different methods: Direct and Indirect Methods
Conversion of Cash Flow from Indirect Method to Direct Method
Key Learning
Assessment

Module III : Forecasting of Cash Flow

Forecasting of Cash Flow Statement
Forecasting of of various Scenarios
Key Learning
Assessment

Module IV : Modelling and Forecasting of Free Cash Flow

Preparation and forecasting of Free Cash Flow to the Firm and Free Cash Flow to Equity
Preparation and forecasting of other Cash Flow Ratios
Key Learning
Assessment

Module V : Modelling and Forecasting of Cash Budget