Monthly Cash Flow Modeling Flashcards
(49 cards)
What is a rolling cash flow forecast?
A forecast that maintains a constant number of forward-looking periods (e.g., 12 or 18 months) and rolls forward each month as actuals become available.
Why do rolling forecasts work best when key cash‑flow drivers are modeled explicitly?
Because explicit drivers directly link assumptions to outputs, making updates quick and accurate.
List the five session objectives highlighted at the beginning of the course.
1) Build assumptions and formulas to forecast the business,
2) Calculate monthly cash flow,
3) Analyze impact on balance sheet & capitalization,
4) Create charts/graphs to show results,
5) Apply a structured Excel approach.
Which three finance career paths particularly rely on monthly cash‑flow modeling skills?
- Treasury Management,
- Financial Reporting, and
- Financial Planning & Analysis (FP&A).
Name the three core sections every robust model must separate.
- Inputs,
- Processing (calculations), and
- Outputs.
What font color convention is commonly used to mark input cells?
Blue font for all user inputs.
Give two reasons to avoid hard‑coded calculations in processing worksheets.
Hard‑coding hides key drivers and makes the model hard to audit or update.
What four‑step modeling best‑practice framework is recommended?
1) Clarify the business problem,
2) Plan your structure,
3) Think about inputs, processes, outputs,
4) Logically build formulas and audit the model.
Describe the ‘inherent tension’ between simple and complex models.
Simple models are transparent and easy to audit but may lack detail, while complex models offer precision but are harder to follow and more error‑prone.
List three hallmarks of robust rolling‑forecast models.
- Explicit key‑driver inputs,
- transparent calculations, and
- summarized, relevant outputs.
Where should complicated processing steps be placed and why?
On a separate worksheet so only final figures appear on output sheets, keeping the model clean.
Why document sources of model inputs with cell comments?
To provide audit trail and ease future updates.
What three major sections constitute a monthly cash‑flow statement?
Operating, Investing, and Financing cash flows.
Outline the four steps to create a rolling cash‑flow forecast from BS and IS.
Forecast operating cash flows, forecast investing cash flows, forecast financing cash flows, derive cash and update balance sheet.
Which three line‑items typically drive changes in operating working capital?
Trade & other receivables, inventories, and trade & other payables.
Explain the ‘detailed’ approach to forecasting working‑capital balances.
Use driver ratios like receivable days, inventory days, and payable days to calculate monthly balances.
What is the ‘quick and dirty’ approach to working capital?
Forecast a single working‑capital line as a percentage of revenue based on trend (e.g., working capital = 10 % of sales).
Write the formula for converting receivable days into a monthly A/R balance.
A/R = Receivable days × Sales ÷ Days in period.
Why is cash itself usually modeled with financing, not operating working capital?
Because financing decisions (debt draw, dividends) primarily govern cash rather than operating cycles.
Provide two typical investing‑cash‑flow line items shown in the slides.
Purchases of fixed assets (PPE) and proceeds from disposals of businesses.
Where do monthly PPE purchase amounts come from in the forecast?
They are pulled from a specific fixed‑asset (PPE) forecast schedule.
Give two examples of financing‑cash‑flow line items.
Increase/(decrease) in long‑term debt and dividends paid.
How are financing cash flows generally derived in the model?
From month‑to‑month changes in related balance‑sheet accounts and retained‑earnings breakdown.
What common Excel issue arises when modeling financing cash flows?
Circular references between debt balances, interest, and cash.
