
Cash Flow Analysis and Cash Flow Forecasting
Target Audience
Corporate Banking Group & Early Warning Unit - Corporate Bankers, Relationship Managers, credit risk officers
Audience Level
Intermediate & Advanced
Duration
3 Days: 9am – 4pm
Delivery
Online or In-class
This course has been designed for corporate bankers to deal with the increasingly volatile trading conditions that client companies are currently facing due to the post Covid economy, global supply chain blockages and the effects of the War in Ukraine. The main focus of the course is to increase the cash flow forecasting skills of the banker to consider external risk shocks within in a shorter time frame, while still undertaking thorough credit risk analysis to protect the bank’s exposure going forward.
The core objectives of the course will therefore comprise the following:
- Why cash flow is essential for the successful operation of the client
- Need for increased cash flow based lending particularly for the client in service industries
- The difference between cash flow and profit; accruals concept differentials; why EBITDA does not spell cash flow and why profitable companies can still default
- Assessing Cash inflows and outflows (sources and uses) within the cash flow statement
- Using the cash flow in credit analysis to assess management action
- Distinguishing cash flows from operations, investing and financing
- Review of Cash flow statements in IFRS
- Constructing cash flow statements in both the Indirect and Direct methods
- The use of the debt service coverage ratio (DSCR) as the principal credit risk ratio from forecast cash flow analysis and Proxy ratio and their limitations
- The impact of working capital changes on net operating cash flow
- Why effective working capital management can temporarily increase the company’s cash flow generation and why these improvements might not be sustainable
- Assessing bad liquidity management and how overtrading risks cash flows and the company’s DSCR
- Assessing the impact of risk events on the client’s ability to honour its debt service.
- Application of the risk management framework to client companies
- Sensitivity analysis using cash flow forecasts in excel to assess impact on company DSCR
- Using cash flow analysis and sensitivity analysis to assess the gross and net working capital needs of the client
Assessing client cash flow management during times of financial and economic stress.
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