Housing Finance: Cash Flow Analysis

CASH FLOW ANALYSIS

Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, limited period of time. Measured of cash flow can be used for calculating other parameters that give information on a company's value and situation. Cash flow can be sued, for example, for calculating parameters; it discloses cash movements over the period.

To determine a project's rate of return or value. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return and net present value.

To determine problems with a business's liquidity. Being profitable does not necessary mean being liquid. A company can fail because of a shortage of cash even while profitable.

As an alternative measure of a business's profits when it is believed that accrual accounting concepts do not represent economic realities. For instance, a company may be notionally profitable but generating little operational cash (as may be the case for a company that barters its products rather than selling for cash). In such a case, the company may be deriving additional operating cash by issuing shares or raising additional debt finance.

Cash flow can be to evaluate the 'quality of income generated by accrual accounting. When net income is composed of large non - cash items it is considered low quality.

To evaluate the risks within a financial product, e.g., matching cash requirements,

evaluating default risk, re - investment requirements, etc.

Cash flow notion is based loosely on cash flow statement accounting standards. It's flexible as it can refer to time intervals spanning over past - future. It can refer to the total of all flows involved or a subset of those flows. Subset terms include net cash flow, operating cash flow and free cash flow.

Sources of cash

1.      Internal Sources

2.      External Sources

Internal Sources are development by the money rotation in nay business. External Sources are finance development due to shares and loans.

Sources of cash

1.      Share documents

2.      Bank loan

3.      Selling of a property

4.      Any business

Cash In Flow

These contain the following

1.      Collecting share document from public

2.      By loan documents

3.      Bank loan or industrial loan or business loan

4.      By sales

5.      Profit from external investment

6.      By sales of property

Cash out flow

1.      Purchase of property

2.      Purchase of raw material

3.      Issues of loans

4.      Current expenses like salary, maintenance etc.

The above cash inflow and outflow are analyze in cash flow analysis.