As we now know, cash is the fuel on which the entire business machinery runs. Before understanding what changes can be brought in which fields, you must have a clear idea on how the numbers have stood from the past few years till now. The following table will help you gather a lot of necessary information in that regard.
Fill up this table with the data needed −
(The “Details needed” column will tell you the source of the information)
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Metric |
Details needed |
This Year |
Last Year |
2 Years |
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Cash on Hand |
Balance |
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Securities |
Balance |
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Cash + Securities as % of Revenues |
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Cash from Operations |
Cash Flows |
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Free Cash Flow= (Cash from Operations − Capital Expenditures Cash Flows) |
Cash Flows |
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Days Inventory Outstanding (DIO)= (Inventory / (Cost of Goods Sold / 365) |
Income & Balance |
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Days Sales Outstanding (DSO)= (Receivables / (Revenues / 365) |
Income & Balance |
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Days Payables Outstanding (DPO)= (Payables / (Cost of Goods Sold / 365) |
Income & Balance |
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Cash Conversion Cycle= DIO + DSO − DPO |
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Based on the information collected above, answer the following questions −
● From the cash perspective, does your company maintain large amounts of cash on records? How does it deal with projects that involve lesser cash?
● How fast does your company utilize its cash to provide the products in demand to its suppliers and customers? Judging from its cash flow, where it must do well or improve its performance to sustain the profit in the future?
● Identify the recent trends in your company’s Cash metrics.
● What does the company share with the public with respect to their cost of capital, hurdle rate, or return on equity?
● Keeping in mind the company’s current cash flow statement, what are its major sources and uses of cash? How do major cost lines like interest payments influence your company’s strategy and current challenges?
● Compare your company’s performance with its strongest competitor’s performance with respect to cash.
● Keeping in mind the company’s current cash situation, which products and services according to you, would give it the maximum advantage?