Advanced Cash Flow

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Business Issue - Commercial lenders are often challenged by complex borrowing situations that require in-depth analysis of cash flow. Many remain unclear about the specific analytical insights gained from applying more rigorous cash flow techniques.

Omega Performance’s Solution - Advanced Cash Flow is a workshop-based course that provides participants with intensive, case-based application of cash flow analysis to a wide-ranging set of business scenarios. It enhances commercial lenders’ skills and knowledge so they are better able to:

Connect quantitative cash flow analysis with qualitative, non-financial factors such as strategic business issues

Interpret the quantitative results from various levels within the UCA cash flow format

Compare the results of cash flow analysis using various formats: UCA, GAAP cash flow, and EBITDA

Analyze debt service coverage using different approaches—EBITDA vs. Net Cash from Operations (NCFO)

Identify clues to detect misleading information

Assess the impact on cash flow of accounting practices

What Is Included

Advanced Cash Flow concentrates on evaluating the adequacy of a borrower's cash flow. The analytical process begins with data furnished by some of the more commonly used cash-flow reporting formats, testing those data for sustainability and finance-ability. It then examines "How much debt-service coverage is enough?" in light of the borrower’s industry, fixed asset requirements, growth rate, profitability, length of the operating cycle, and other factors. This analysis is applied to three different cases of varying size and complexity.

Principles of Cash Flow and 3-Layer Approach

Quantitative Analysis of Cash Flow

EBITDA
Free cash flow
GAAP cash flow
Traditional/quick cash flow
UCA cash flow

Financial Drivers of Cash Flow

Change in sales
Change in margins
Change in turnovers
Capital expenditures

Macro Factors Behind Cash Flow

Economy and industry
Management decisions and strategy

Changes in EBITDA and EBITDA Coverage

EBITDA vs. NCFO
Cash flow from profits vs. Changes in balance sheet accounts
Debt service coverage using EBITDA vs. NCFO

Sustainability of Cash Flow to Fund Sales Growth

Asset quality
Financial capital expenditures related to sales growth
Cash vs. non-cash items
Recurring vs. non-recurring items

Delivery Options

Advanced Cash Flow is a one-day workshop conducted by Omega Performance consultants.

Results You Can Expect

Advanced Cash Flow helps staff:

Improve analysis of credit risk
Structure credits that effectively address the underlying drivers of cash flow
Reconcile the analysis using different approaches to cash flow
Connect underlying industry characteristics and business strategies with cash flow results
Detect early warning signals from analysis of cash flow and debt service coverage
Improve internal communication of cash flow analysis

Who Should Be Trained

Advanced Cash Flow is for commercial lenders, commercial relationship managers, commercial credit managers, credit analysts, and loan administration staff.

Prerequisites

Participants should have sufficient credit experience and/or have successfully completed Omega Performance’s Commercial Loans to Business or an equivalent course.