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Business Financing: The Analysis Of Monetary Flows And Financial Indicators Of The Business Plan For The Potential Investor. (part 1)

Business financing: The analysis of monetary flows and financial indicators of the business plan for the potential investor. (part 1)

At the analysis of investment projects it is necessary to imagine well, what monetary flows go at the enterprise, their structure and what exactly they show. Those monetary flows of the enterprise represent also what financial indicators they are characterized, it is in detail and clearly told in the given article.

Kinds of cash flows:

All monetary flows of the modern enterprises are considered in a cut of three types of activity: enterprise main activity (it can be called also as operational or productive activity), investment activity and financial activity.

Cash flows of the enterprise for main activity represent receipts and uses of money funds providing accomplishment of functions of the enterprise according to a primary activity (production, trade, services, etc.). As enterprise main activity is the main source of profit, that, by itself, it should be also the key source of receipt of money funds. The main receipt of money funds on the enterprise is monetary sales proceeds commodity-material assets (works, services). If receipt of money funds as sales proceeds isn’t prevailing in a monetary flow, that, probably, it is necessary to consider what type of activity is at the core of the enterprise.

Among other monetary inflows it is possible allocate the following: debt receivable repayment in the monetary form, a receipt commodity-material assets, received on the barter, received from buyers and customers advances, etc.

The mainstream of an expenditure of money funds of any enterprise for a primary activity is a payment to suppliers and contractors for acquired at them commodity-material assets (works, services). It is no wonder: after all without raw and materials, and sometimes without purchased semi finished products realization of process of production basically impossible. The same concerns trade: that something to sell it is necessary to purchase it first.

The enterprises performing works and rendering services, acquire at suppliers equipment, expendable materials, the tool, etc. Among other account monetary flows on a primary activity it is possible to allocate the following: a payroll payment to workers of the enterprise, payments in the budget and off-budget funds, deductions on social sphere, payment of percent for using proceeds of credit, etc.

As to monetary flows on investment activity of the enterprise they represent receipt and an expenditure of the money funds connected with acquisition or sale of long-term assets of the enterprise and also with incomes from made before investments. It is necessary to notice that, as at a successful current of business the enterprise aspires to expansion and modernization of capacities, conducting investment activity that can result (and, as a rule, results) in time cash outflow of the enterprise.

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