Cash

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)

Metric

Details needed

This Year

Last Year

2 Years

Cash on Hand

Balance

 

 

 

Securities

Balance

 

 

 

Cash + Securities as % of Revenues

 

 

 

 

Cash from Operations

Cash Flows

 

 

 

Free Cash Flow=

(Cash from Operations − Capital Expenditures Cash Flows)

Cash Flows

 

 

 

Days Inventory Outstanding (DIO)=

(Inventory / (Cost of Goods Sold / 365)

Income & Balance

 

 

 

Days Sales Outstanding (DSO)=

(Receivables / (Revenues / 365)

Income & Balance

 

 

 

Days Payables Outstanding (DPO)=

(Payables / (Cost of Goods Sold / 365)

Income & Balance

 

 

 

Cash Conversion Cycle=

DIO + DSO − DPO

 

 

 

 

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?