Studybeat.com
Section B
The Cashflows and the Process
Cashflows
Net investment Cash outlay (NICO)
Operating Cashflows (OCF’s)
Net disposal cashflow
1st Cashflow:
Net Investment Cash Outlay
NICO
• All the money needed to start the project
• Cash outflow
• Money used to purchase new equipment
• Includes changes to Net Working Capital
Net Working Capital
• The money you need to operate the business
• Inventory
• Stuff
Net Investment Cash Outlay
(several names)
N-I-C-O (NICO)
KO (KNEE- CO)
-O (NIKE- O)
Stay on your toes
NICO Equipment
Scourge II
Transportation
Add transportation and costs to equipment.
Change in Net Working Capital
Ammunition
Operating Cash Flows- OCFs
The change in cash flows directly resulting from the project
Money the company is actually bringing in fro the project
Calculated on a yearly basis
Operating Cash Flows- OCFs
Total Revenues
- Opereating Costs
- Depreciation Costs
Taxable Income
- Income Taxes
Net Income
+ Depreciation Costs
Why add back Depreciation?
Depreciation costs are not actual cash removals from your pocket…
Subtracted from revenues to figure out how much tax you owe
Although depreciation happens to assets…
It is not an actual removal of dollars from your bank account
Depreciation is merely done for accounting purposes to get the lowest possible tax payment.
OCF= Revenue
- Operating expenses
- Depreciation
-Taxes
+ Depreciation
Net Disposal Cash Flow
1. Liquidation- removal costs- taxes
2. Release of Net Working capital
Spending cash
Inventory
Accounts receivable
Sell off the inventory
Collect all the accounts receivable
Net Disposal Cash Flow
Liquidation
- Removal costs
- Income Taxes
+ New working capital
Net Disposal Cash Flow
Net Investment Cash Outlay
NICO
Operating Cash Flows
OCF
Net Disposal Cash Flow
Transcription by:
Scribe4you Transcription Services