• Shockproof! Training
  • 1.866.237.7228
  • Non-Member

    Membership Check

    Please enter your email address and we will check to see if a membership exists for your organization.

    Check Cancel
  • Account
    • Sign in

      If you have an account, please enter your login information.

      Sign-in

      Find Enrollments

      To quickly access links to materials or Session Access instructions, enter the email address used when enrollment was performed.

      Click "Find Now" to begin search.

      Find Now

      Forgot your password?

      Please provide your email address and we'll email you a reminder.

      Send it to me!

      Subscribe

      Please provide the information below to receive our mailings.

      Subscribe!
      Account Options
      1. Sign In... enter the resource center
      2. Access Materials... find my enrollments
      3. Forgot password?... memories fade
      4. Subscribe... to receive our mailings
      5. Contact us... if you have any questions, just ask
      6. Create a User Account* requires membership
  • Sign-in
  • Home
  • Products
  • Learning Paths
  • Calendar
  • Pricing
  • Communications
  • Contact Us
  • Help
  • About Us
  • Membership Check
  • Account

Instructor Blog - Financial Analysis

  1. Home
  2. Communications
  3. Instructor Blog
  4. Financial Analysis

Ratios and Messages about Profitability and Cash Flow


  • admin

  • 12/4/2020 4:14:51 PM

  • 375

  • Financial Analysis
  • Copy / Share Link

Q: Regarding Poll Question 5, please explain how the increase in accounts receivable would have allowed them to meet all operating expenses?

A: Poll Question 5 is as follows:

“If accounts receivable had remained at 20 days in 2018, the increase in the balance would have been $48,688, which means that:

  • The company’s 2018 business cash flow would have improved by $107,510.
  • The company would have been able to meet all operating expenses, including interest expense from business cash flow.
  • The company would still fall short of meeting all interest-bearing debt service.
  • All of the above.
  • None of the above.”

The correct answer is “All of the above”.

If accounts receivable had remained at 20 days in 2018, the accounts receivable balance for Buckeye Beverages, Inc. would have increased by $48,688 rather than by $156,198. This $107,510 reduction in the accounts receivable would a) improve the company’s business cash flow by $107,510, which would b) result in a $21,980 surplus at Business Cash Income, but c) fail to generate sufficient business cash flow to pay down $164,223 of long-term debt as scheduled.

Positive Business Cash Income of $21,980 means that the company enjoyed a $21,980 cash flow surplus of $21,980 after paying all cash operating expenses, including interest expense but not scheduled long-term debt repayment. Since scheduled long-term debt repayment in 2018 was $164,223, the $21,980 cash flow surplus available to meet this payment fell short of doing so by $142,243.

In other words, if the company allowed accounts receivable to increase by only $48,688 – the increase that would take place if accounts receivable days remained at the 2017 level of 20 days – Buckeye Beverages, Inc. would be able to meet all its operating expenses, including interest expense. But it would fall short of fully paying its interest-bearing debt service by $142,243.

Course overview: Ratios and Messages about Profitability and Cash Flow

Categories
  • Commercial Real Estate(33)
    • Commercial Real Estate(32)
    • Questions: Commercial Real Estate - Hands On(1)
  • Contractors(52)
    • Understanding and Analyzing Contractor Financial Statements: Part I of II(32)
    • Understanding and Analyzing Contractor Financial Statements: Part II of II(20)
  • Covenants(11)
    • Complex Loan Structuring(1)
    • Covenant Testing(1)
    • Covenant Use in Controlling Cash Outflows(5)
    • Financial Gap Ratio(1)
    • Financing Gap revisited(1)
    • The Financing Gap Ratio - defined(1)
    • UCA cash flow and debt service coverage?(1)
  • Credit College - Accounting Essentials(107)
    • Session #1: Financial Statement Structure and Composition(39)
    • Session #2: Double Entry Accounting, the Accounting Equation, and Debits and Credits(24)
    • Session #3: Critical Accounting Principles and Assumptions and More Debits and Credits(23)
    • Session #4: Recording Transactions and Creating the Balance Sheet and Income Statement(21)
  • Credit College - Cash Flow(14)
    • Session #1: UCA Cash Flow Statement, Traditional "Cash Flow," and EBITDA(8)
    • Session #2: Cash Impact Analysis, Borrowing Causes Revisited, and Management Assessment(2)
    • Session #3: FASB 95 Statement of Cash Flows Conversion to UCA Cash Flow Statement(1)
    • Session #4: Cash Flow Proxies, Debt Capacity, and the UCA Cash Flow Statement(3)
  • Credit College - Commercial Business(208)
    • Session #1: Analytical Decision Tree and the Credit Write-Up(29)
    • Session #2: Financial Statement Review and Ratio Analysis(43)
    • Session #3: Cash Flow Analysis and Borrowing Causes(34)
    • Session #4: Management Assessment, Projected Cash Flow, and the First Way Out(20)
    • Session #5: Guarantor Analysis and the Second Way Out(30)
    • Session #6: Non-Financial Red Flags and Performance Implications(13)
    • Session #7: Identifying and Mitigating Repayment Risks(21)
    • Session #8: The Credit Write-Up Again(18)
  • Credit College - Commercial Real Estate(218)
    • Session #1: The Credit Write-Up and the CRE Analytical Process(28)
    • Session #2: Ratios, Borrower Cash Flow, and the First Way Out(33)
    • Session #3: Guarantor Analysis, Global Cash Flow, and the Second Way Out(40)
    • Session #4: The Appraisal Report and Approaches to Market Value(9)
    • Session #5: The Income Capitalization Approach and the Cap Rate(24)
    • Session #6: Underwriting Standards. Actual vs. Stabilized NOI, and Breakeven Analysis(54)
    • Session #7: Management Assessment, Competitive Forces, and Projected Performance(16)
    • Session #8: Repayment Risks, Covenants, and the Credit Write-Up Revisited(14)
  • Credit College - Credit Basics(93)
    • General(1)
    • Session #1: Understanding Financial Statements and Business Organizations(34)
    • Session #2: Personal Qualities and Competitive Advantages(8)
    • Session #3: Critical Ratios and The First Necessary Condition for Business Success(28)
    • Session #4: Non-Financial Red Flags, Cash Flow and Second Necessary Condition for Business Success(22)
  • Credit College - Taxes(213)
    • Analysis Using Business Tax Returns(1)
    • Converting business income tax returns into accrual financial statements(1)
    • Employee Retention Credit (ERC)(1)
    • Session #1: Business Income Tax Returns(21)
    • Session #2: The Section 179 Deduction(29)
    • Session #3: Understanding Schedules K-1(19)
    • Session #4: Personal Income Tax Returns and Cash Flow(14)
    • Session #5: Schedule M-1 and the Accrual Income Statement(25)
    • Session #6: Business Income Tax Returns and Ratio Analysis(58)
    • Session #7: Business Income Tax Returns and Cash Flow Analysis(23)
    • Session #8: Cash Based Income Tax Returns(21)
  • Credit Curriculum(1)
  • Credit Write Up(33)
    • Analytical Focus in the Credit Write Up(27)
    • Description and Analysis in the Credit Write-Up(6)
  • Debt Capacity(9)
  • Financial Analysis(55)
    • ACS (Accounting Standards Codification) 842(1)
    • Analysis when one spouse is not a guarantor(1)
    • Auto Dealer analysis(1)
    • Auto Dealership/UCA/Floor-Plan debt(1)
    • Capital Gains(1)
    • Cash distributions, Business cash flow and Guarantor global cash flow(1)
    • Corporate tax return or CPA prepared financial statements?(1)
    • CPA firms and legal firms(1)
    • Credit Analysis Question(1)
    • CSVLI - Cash Surrender Value of Life Insurance(1)
    • Depreciation FAQ(1)
    • Distributions(1)
    • Distributions taken from prior year earnings(1)
    • EBITDA, Defined(1)
    • ESOP financing(1)
    • FAQ - calculating Business Profit (1)
    • Financing Needs(2)
    • Flooring Lines(1)
    • Funded Debt to EBITDA(1)
    • Gain on sale and traditional cash flow(1)
    • Insurance Company statements(1)
    • Language of Business On-Line Classroom Q & A(1)
    • Lending to a Start-up(1)
    • Market and industry data sources(1)
    • More on Depreciation(1)
    • Participations and private equity firms(1)
    • Pitfalls of Partial Analysis(4)
    • Prior Period Adjustments to Retained Earnings(1)
    • Ratios and Messages about Profitability and Cash Flow(12)
    • Schedule L(1)
    • Section 263A(1)
    • Self-Employment Tax(1)
    • Session #1: Business Income Tax Returns(1)
    • Session #2: The Section 179 Deduction(1)
    • SG&A% - Another FAQ(1)
    • SG&BC Course Progress Check Question(1)
    • Syndicated Loans(1)
    • Tax Returns vs. Accrual Statements in Assessing Borrower Risk(2)
    • UCA debt coverage ratio for an interim(1)
  • Five Cs of Credit(10)
  • Fund Accounting(52)
    • Fund Accounting and Municipality Analysis: Part I of II(31)
    • Fund Accounting and Municipality Analysis: Part II of II(20)
    • GASB 68(1)
  • Global Cash Flow(51)
    • Borrower with many corporations(1)
    • Global Cash Flow(50)
  • Healthcare(18)
    • Assessing Hospital Financial Performance(6)
    • Assessing Medical Practices(9)
    • Forces Impacting Hospital Financial Performance(3)
  • Loan Documentation(53)
    • Commercial Loan Documentation(30)
    • Commercial Real Estate Loan Documentation(23)
  • Minimum Financial Data(14)
  • Not for Profit Analysis(24)
  • Personal Income Tax Returns and Cash Flow(65)
    • Session #3: Understanding Schedules K-1(27)
    • Session #4: Personal Income Tax Returns and Cash Flow(38)
  • Problem Loans - Loan Classification(2)
  • Projections(22)
    • Projections and Repayment Sources: Part I of II(13)
    • Projections and Repayment Sources: Part II of II(9)
  • Spreading Financial Statements(6)
  • Stress Testing(1)
  • Testing(2)
    • Exams(1)
    • How do the Credit College exams work?(1)
  • Trusts(2)
    • Trust Returns(1)
    • Trusts(1)
  • UCA Cash Flow(58)
    • Advanced UCA Cash Flow: Part I of II(51)
    • Advanced UCA Cash Flow: Part II of II(4)
    • Related Party Transactions and the UCA Cash Flow Statement(1)
    • Sales Neutral Business Cash Income(1)
    • UCA Cash Flow and Agricultural Loans(1)
  • Working Capital and UCA Cash Flow(27)
Shockproof! Training

PO Box 30304 Walnut Creek, CA 94598
1.866.237.7228 support@shockproof.com

  • About
  • Career Opportunities

© Copyright 2001-2025 Shockproof! Training