Cash Flow Performance Metrics

Master your Cash Flows It’s all about the cash money 🤑 but there are countless metrics to measure it. Which metric is the best one to use? That depends a lot on your business and a number of other factors Let’s do a deep dive on a number of metrics to give you a grip on your cash: 1. Operating Cash Flow (OCF):       • Formula: OCF = Net Income + Depreciation + Amortization + Other Non-Cash Items - Changes in Working Capital       • Essence: Gauges the cash generated or used by a company in its core business operations.       • Reading the Numbers: More operating cash flow means better liquidity for day-to-day operations, investments, and paying off debts.     2. Free Cash Flow (FCF):       • Formula: FCF = Operating Cash Flow - Capital Expenditures       • Essence: Tracks cash that's available for distribution to stakeholders or for reinvestment.       • Reading the Numbers: Positive FCF shows a firm's ability to generate cash and fund expansions, pay dividends, or lower liabilities.     3. Cash Conversion Cycle (CCC):       • Formula: CCC = Days of Inventory Outstanding + Days of Sales Outstanding - Days of Payables Outstanding       • Essence: Calculates the time taken to turn investments in inventory and receivables into cash, less the time to pay off suppliers.       • Reading the Numbers: A shorter CCC implies effective working capital management and sufficient cash for meeting obligations and growth.     4. Net Cash Flow Formula:       • Formula: Net Cash Flow = Operating Cash Flow + Investing Cash Flow + Financing Cash Flow       • Essence: Represents total cash inflows and outflows from operating, investing, and financing activities.       • Reading the Numbers: Positive net cash flow means a firm is generating more cash than it's spending.     5. Discounted Cash Flow (DCF) Formula:       • Formula: DCF = CF1 / (1+r)1 + CF2 / (1+r)2 + ... + CFn / (1+r)n       • Essence: Valuates an investment or a company by projecting its future cash flows to the present.       • Reading the Numbers: Higher DCF suggests greater future cash generation and increased value.     6. Present Value Formula:       • Formula: PV = CF / (1+r)t       • Essence: Determines today's worth of a future cash flow.       • Reading the Numbers: A greater present value indicates a more valuable future cash flow.    === There are even more cash formulas than the ones listed above, but I’m limited to only 3k characters. Which ones would you add? Let us know by joining in on the discussion in the comments below 👇

Cash flow doesn’t lie. But tracking cash flow is not enough. Here’s the thing: Cash flow cuts through the noise, it shows what’s working What’s broken, and how long you can keep running. But real cash flow intelligence is knowing which questions to ask and what insights to uncover. ➡️ Start with my 30 point cash flow checklist and learn to make better business decisions today: https://bit.ly/4fp2eUr Let’s break it down: 1️⃣ Are we generating cash from core operations? KPI: Operating Cash Flow If your business isn’t funding itself, it’s not sustainable. Ask this: Are we building a business that runs on its own cash? 2️⃣ Can we meet short-term obligations comfortably? KPI: Short-Term Liquidity Liquidity is confidence—knowing you can pay the bills without scrambling. Ask this: Do we have enough cash for today’s needs? 3️⃣ Are our assets pulling their weight? KPI: Asset Turnover Your assets should work as hard as you do. This metric measures how efficiently they generate revenue. Ask this: Are we maximizing value from our investments? 4️⃣ How much of our profits turn into cash? KPI: Earnings Quality Revenue looks great on paper, but cash is the reality. Ask this: Are our profits real—or just accounting smoke and mirrors? 5️⃣ Can we fund growth without outside help? KPI: CapEx Coverage Growth demands cash. This KPI measures whether your operations can cover expansion costs. Ask this: Are we reinvesting wisely or overextending? 6️⃣ How much cash is left for our investors? KPI: Free Cash Flow After Debt This shows what’s left after covering obligations—true value for stakeholders. Ask this: Are we creating real returns or just breaking even? 7️⃣ Are we managing our cash conversion efficiently? KPI: Cash Conversion Cycle Cash stuck in inventory or receivables can cripple growth. Ask this: Are we turning cash fast—or tying it up unnecessarily? 8️⃣ Is our debt helping or hurting us? KPI: Debt-to-Cash Flow Debt fuels growth—but only if it’s manageable. Ask this: Is our debt a growth tool or a looming risk? 9️⃣ Are we making smart investments? KPI: Return on Invested Capital (ROIC) This tells you if your capital is driving meaningful profits. Ask this: Are we investing in the right places—or wasting resources? 🔟 Are we delivering shareholder value? KPI: Cash Flow Per Share (CFPS) For shareholders, this is the ultimate metric of trust and performance. Ask this: Are we increasing value—or just treading water? The Takeaway: Cash flow KPIs don’t just measure performance—they reveal the health of your business. They tell you: 🔹 Where you’re thriving. 🔹 Where you’re exposed. 🔹 Where to focus next. But metrics mean nothing without the right questions. Start here. Make better decisions. Build a stronger business. Join 3,000 improving their cash flow skills with me: https://bit.ly/cfmol ♻ Like, Comment, and Share if this was helpful. And follow Oana Labes, MBA, CPA for more.

𝟭𝟬 𝗖𝗮𝘀𝗵 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗞𝗣𝗜𝘀. Cash is King, as they say, but how do you know if you're managing it successfully? You do that by implementing these ten KPIs. ---------- 1/ CASH CONVERSION CYCLE The CCC measures the time it takes for cash to flow through the organization. A shorter CCC indicates more efficient cash management and better liquidity. Track the CCC over time and compare it to industry benchmarks for performance evaluation. 2/ FORECAST ACCURACY Measure the accuracy of cash flow forecasts by comparing projected cash flows to actual cash flows. This KPI assesses the organization's ability to accurately predict cash inflows and outflows, helping identify areas of improvement. 3/ ADEQUACY Assess the adequacy of available cash to meet short-term obligations and maintain sufficient liquidity. This KPI compares the organization's cash position against its short-term liabilities, ensuring that there is enough cash on hand. 4/ CASH TO CURRENT LIABILITIES RATIO This ratio measures the organization's ability to meet its short-term obligations using available cash. It compares the total cash balance to the current liabilities, providing an indication of the organization's liquidity strength. 5/ DSO DSO measures the average number of days it takes to collect payment from customers after a sale. A lower DSO indicates faster cash conversion and improved cash flow. Track DSO regularly to identify trends and implement improvements. 6/ DPO DPO measures the average number of days it takes to pay suppliers after receiving an invoice. Extending the DPO can improve cash flow by maximizing the time to pay bills. It should be balanced though with keeping good vendor relationships. 7/ BURN RATE The cash burn rate measures the rate at which the organization consumes its cash reserves. This KPI is particularly relevant for start-ups and rapid-growth organizations. Monitoring the cash burn rate helps ensure that cash reserves are sufficient. 8/ MARGIN Cash flow margin measures the percentage of revenue that converts into cash flow. It indicates the organization's ability to generate cash from its core operations. A higher cash flow margin indicates better cash generation and management. 9/ CFROI CFROI measures the return generated on the cash invested in the business. It compares the cash flow generated by the business to the amount of cash invested. A higher CFROI indicates better utilization of cash resources. 10/ LIQUIDITY RATIOS Various liquidity ratios, such as the current ratio and the quick ratio, provide insights into the organization's ability to meet short-term obligations. These ratios assess the adequacy of liquid assets available to cover current liabilities. ---------- How are you managing your cash flows? Any KPIs you'd add that you find more important than those listed? #finance #cashflow #cfo #accountingandaccountants #financemaster

𝐒𝐭𝐞𝐩𝐬 𝐭𝐨 𝐀𝐧𝐚𝐥𝐲𝐳𝐞 𝐚 𝐂𝐚𝐬𝐡 𝐅𝐥𝐨𝐰 𝐒𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭 𝐔𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝 𝐭𝐡𝐞 𝐒𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞 A cash flow statement is divided into three sections: Operating Activities: Cash from core business operations. Investing Activities: Cash spent on or generated from asset purchases/sales. Financing Activities: Cash raised or repaid through debt or equity. 𝐑𝐞𝐯𝐢𝐞𝐰 𝐂𝐚𝐬𝐡 𝐅𝐥𝐨𝐰 𝐟𝐫𝐨𝐦 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐀𝐜𝐭𝐢𝐯𝐢𝐭𝐢𝐞𝐬 Check if core operations generate positive cash flow. Analyze major inflows (e.g., sales revenue) and outflows (e.g., expenses, taxes). 𝐄𝐱𝐚𝐦𝐢𝐧𝐞 𝐂𝐚𝐬𝐡 𝐅𝐥𝐨𝐰 𝐟𝐫𝐨𝐦 𝐈𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠 𝐀𝐜𝐭𝐢𝐯𝐢𝐭𝐢𝐞𝐬 Identify major investments in assets or proceeds from asset sales. Determine if cash is being wisely reinvested for growth. 𝐄𝐯𝐚𝐥𝐮𝐚𝐭𝐞 𝐂𝐚𝐬𝐡 𝐅𝐥𝐨𝐰 𝐟𝐫𝐨𝐦 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐧𝐠 𝐀𝐜𝐭𝐢𝐯𝐢𝐭𝐢𝐞𝐬 Review sources of funding, such as loans or equity. Check repayments of debt, dividends, or share buybacks. 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐞 𝐊𝐞𝐲 𝐌𝐞𝐭𝐫𝐢𝐜𝐬 Free Cash Flow (FCF): Cash available after covering operating and capital expenses. Operating Cash Flow Ratio: Measures the ability to cover current liabilities with cash from operations. 𝐈𝐝𝐞𝐧𝐭𝐢𝐟𝐲 𝐓𝐫𝐞𝐧𝐝𝐬 Compare current cash flows with previous periods to spot patterns. Look for consistent growth or potential red flags like declining cash from operations. 𝐂𝐨𝐦𝐩𝐚𝐫𝐞 𝐰𝐢𝐭𝐡 𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐁𝐞𝐧𝐜𝐡𝐦𝐚𝐫𝐤𝐬 Evaluate performance relative to competitors. Identify strengths and areas for improvement. 𝐈𝐧𝐭𝐞𝐫𝐩𝐫𝐞𝐭 𝐑𝐞𝐬𝐮𝐥𝐭𝐬 Positive Cash Flow: Indicates strong financial health and liquidity. Negative Cash Flow: Signals potential issues requiring corrective measures. 𝐓𝐚𝐤𝐞 𝐀𝐜𝐭𝐢𝐨𝐧 𝐁𝐚𝐬𝐞𝐝 𝐨𝐧 𝐅𝐢𝐧𝐝𝐢𝐧𝐠𝐬 Optimize operations to improve cash inflows. Cut unnecessary expenses or consider new financing options if needed.