On the business and cash flow

[Abstract] At present, many companies will manage and finance the development are closely linked, mainly in strategic planning, Economic interests, analysis, and tapping the potential synergies in four areas, however, are so intrinsically linked with the holding company level cash flow is closely related to cash shortage or redundancy are not conducive to long-term development. Throughout history, many well-known companies or funds due to cash flow break and not make full use of opportunities missed, the final demise from prosperity, from the business situation, through an analysis of holding company level cash flow, objectively reflect the linkage of business management and finance is an orderly, to strengthen the enterprise management level.

[Keywords] cash flow, revealing the role of financial analysis, management

First, the cash flow statement reveals the role and characteristics of
China's enterprises of the higher authorities of the enterprise's performance appraisal and their own financial analysis, using the core indicators are profit targets, but profit targets in the corporate performance of the problem there are some operational limitations, etc. At present, the amount of flow indicators are gradually replaced by profit targets as indicators of the core. In addition, cash flow instead of changes in financial position of China's enterprises must be prepared to become the third report. cash flow as the main report prepared One of its role in corporate financial management can be summarized as "six revealed a manifestation." revealed an accounting period in the context of corporate cash activities, reveal the company's real profitability, reveal the company's solvency, to reveal enterprise's ability to pay, to reveal the company's future ability to obtain cash, and reveal the activities of the enterprise's cash management activities up anomalies in addition to revealing more than six, the cash flow effect can also be "a manifestation of" reflected the It further demonstrates the comparability of corporate financial data, the data to make the information more comprehensive understanding of the business users of both the vertical development of different periods, but also lateral and contrast different enterprises, which measure the level of their financial.

Cash flow statement and balance sheet, income statement, and the original changes in financial position compared with certain characteristics, including objectivity, relevance, appropriateness.

Objectivity: the cash flow statement and income statement compared to better ensure the quality of earnings. As the income statement is based on the principle of accrual determined, with strong digital operational, companies can wash sales, marketing or advance to confirm its intention to expand the scope of credit to increase profits, so often there will be a very objective information, but corporate profits still there is always the phenomenon of drying up the cash, or profit a smaller scale, there are idle funds of the situation at hand, while the cash flow statement reflects the information is based on a cash basis, to a certain extent, this account does not deserve to eliminate phenomenon, making the report reflect the information even more impressive, revealing the good and bad quality of the accounting profit.

Relevance: historical cost denominated balance sheet relevance of the information provided is not so credible, in order to cash system based on information provided by the cash flow statement is more comprehensive and rich in traditional financial analysis , using the balance sheet related to current ratio, quick ratio and other indicators point in time analysis of short-term liquidity will encounter inventory, receivables and other current line is not strong project and the use of debt ratio, return on investment there are other indicators of accrual accounting indicators of defects [1].

Adaptability: the use of cash flow information, accounting information users can be more scientific evaluation of enterprises to adapt to changes in business environment to adjust the cash flow ability to more accurately predict future financial situation, to make more rational decisions.

Second, from a cash flow statement to see the company's financial situation and development trend
Through the cash-flow statement of the relevant data for comparison, analysis and Research to understand the financial position and found that companies in financial problems, and predict future financial situation from the cash flows of the "six revealed a manifestation of "Cash flow analysis point of view the content of the very flexible, can generally be divided into the following areas: structural analysis, solvency analysis, analytical ability to pay dividends analysis, earnings quality analysis.

1 Structural analysis of cash flow
Composed of content from the point of view, our cash flow is usually divided into three categories, namely cash flow from operating activities, investing activities generated cash flow, cash flow from financing activities under normal circumstances the cash flow from operations in addition to maintaining business activities outside the normal flow, there should be adequate compensation operating long-term assets depreciation and amortization, and interest payments and the ability to cash dividends. The cash flow has a certain operation of the law, and there is close relationship between contact and the level of cash holdings should be the phase of business development in business start-up period, the level of cash holdings is not high, a large number of business activities, cash expenditures for business expansion to provide protection. In the mature stage of business development, corporate investment funds should be gradually withdrawn from circulation. Generally speaking, healthy development of the business's cash flow from operating activities should be far greater than zero, the cash flow generated from operating activities less than zero may consume existing enterprise the accumulation of money, cash from investing activities to be reduced, or additional loan financing, with a corresponding cash flow from financing activities increased to support the needs of cash from operating activities by "cash inflows (outflows structure ratio = individual cash inflows (outflows) / total cash inflow (outflow of the total "source of funds analysis, cash usage is reasonable, as well as with indicators" than = the inflow and outflow of cash inflows from financial activities of the process / procedure of the financial activities of the cash outflows "to assess the Economic activities of enterprises of rationality, can be used to predict future cash flows [2] Links to free download http://www.hi138.com
2 solvency analysis
The use of cash flow to analyze the solvency of enterprises, need to combine the relevant balance sheet indicators, key indicators are: cash debt maturity ratio, cash ratio, cash ratio of total debt in cash and cash due debt ratio indicators than two different is that the ratio of cash flow in some liabilities may be extended, the company should be combined with their own specific circumstances analysis. If a company's debt amounted to 289.66 million yuan, the cash flow generated from operating activities, net 36.79 million yuan, the company's operating cash total debt ratio = 3679/28966 = 12.7%, assuming market interest rate is 10%, then the company's largest debt capacity is 3679/10% = 367.9 million yuan, and the ability of the company's biggest interest is 12.7 %, as long as the timely payment of interest, you can refinance old debt by maintaining the size of the debt from the ability to look at interest, net debt has been borrowed, companies can also borrow 78.24 million yuan (36790-28966 [1].

3. The ability to pay dividends [2]
For a company's shareholders, the companies can pay dividends is related to their own vital interests, the ability to pay dividends of analysis is the basis of profitability analysis, profit is not able to pay dividends, profits for net profit, the ability to pay reflects their actual realization of assets and ability to pay. net operating cash flow per share ratio = Net operating cash flow / (maintenance capital expenditure + dividends + cash preferred stock maintenance expenses), if The ratio greater than 1, indicating that the company has sufficient funds to maintain the viability of enterprises, and there are some funds that can be used to expand the production scale.

4 earnings quality analysis
Earnings quality analysis was used to assess earnings quality of financial indicators. Some businesses to expand revenue and profit growth in a row, however, decreased cash flow from operations, some companies report operating profit in the small proportion of total profit, while the proportion of operating income large, and even some business sales rose sharply, but in order to reduce inventory, a large amount of accounts receivable, sales are not change significantly due to the existence of these false phenomenon, earnings quality analysis by business conditions to ensure the objectivity becomes important of which net profit ratio = cash generated from operating activities Net cash flow / net income, the ratio is less than 1, indicating that there has not been achieved in the current net cash profit, even if the business is profitable cash shortages can occur, severe cases lead to bankruptcy.

The following select Suning Appliance Co., Ltd. 2010 Annual Report of the data used.

The table of results of operations of Suning Appliance, 2008, 2009, 2010, the main income of cash recovery rate was 7.65%, 9.53%, 5.14%, indicating that 2010 revenues to achieve a lower proportion of cash flows, corporate income quality is not high, this three-year cash net profit ratio was 128.83%, 143.35%, 71.45%. three-year net profit to achieve cash recovery ratio is high, the low percentage of receivables that the quality of higher profits . 2009, 2010, net operating cash flow is greater than the ratio of operating profit, may be due to receive the previous year's receivables.

Third, the use of cash flow and management
In order to ensure cash flow to maintain a reasonable level, and ultimately have a reasonable use of management knowledge management control. With the specific circumstances of financial management activities of enterprises to raise capital, production capital investment, product cost of the formation of business management activities, financial forecasting, financial decision-making, financial control, financial measurement, financial analysis, and analyze the level of cash flow should be combined with holding the balance sheet and income statement together with the evaluation, analysis and attention to business, investment and financing activities related to cash flow structure on this basis, predict business risks and financial crises, and establish financial control system that allows business managers to correctly grasp the cash flow information, adjusting the use of funds, to minimize redundancy or shortage of cash, the largest intended to maximize capital efficiency [3].


References
[1] Li Ning from the cash flow statement to see the solvency of enterprises [J]. Liaoning Normal University, 2000.

[2] Gu new from the cash flow statement to see the financial situation and development trend of [J]. Shandong University of Technology, 2003.

[3] Di yi Chen Through analysis of the cash flow to determine the business case [J]. Economic Research Tribune, 2009. Links to free download http://www.hi138.com