CAPSIM - Analysis Presentation
swilson83
AnalysisPresentationHelper--howtointerpretcashactivitiesslides1.docxPresentations – How to Do Good Analysis
A. Good Analysis – How To Give it
· don’t just read off the values from the slide · tell the STORY behind the numbers – link numbers to specific products and decisions
B. Interpreting Cash Flow Slides
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Slide |
Causes (usually a combination of the following) |
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Cash from Operating Activities |
Positive Values ·High Sales of products -- mention specific products - Lower costs for materials & labor (variable costs) - Lower costs for Period costs - which generate higher profits and therefore cash from operating activities. - selling off excess inventory produced in a previous round Negative Values ·Excessive expenses (materials, labor, period costs) · Excessive amounts of product left on hand – over optimistic sales forecasting or production creating inventory carrying charges · Low sales due to competition or bad positioning of products · Over-investment in TQM or investment in a new Product (R&D) · excessive interest payments |
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Cash from Investing Activities |
Positive Values ·Selling off capacity generates positive cash from investing Negative Values - buying capacity, automation investment - NOT TQM or R&D (!) - not a bad thing to have negative cash from investing; negative and positive values are simply descriptive of what happened |
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Cash from Financing Activities |
Positive Values · issuing stock, taking loans, taking long-term debt, taking an emergency loan Negative Values · buying back stock, paying back loans, issuing dividends (don’t pay more than EPS in a dividend or it will hurt your stock price) |
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Ending Cash Balance |
· don’t have to say too much about this – other than if you are in a strong, medium or weak cash position. |
