CASHFLOW

Hello everyone my name is Sohayla Magarang, I’ll be presenting about cash flow.

Before proceeding on the topic, these are the contents of our report to help you further sort the
information being delivered:

1. Defining Cash flow

2. Cash flow diagram
3. End-of-Period Convention
4. Example problems on Cash flow

1. Defining Cash flow

Okey, now let’s proceed to what is Cash flow?

Cash Flow (CF) is the increase or decrease in the amount of money a business, institution, or
individual has. In finance, the term is used to describe the amount of cash (currency) that is generated
or consumed in a given time period.

So in a more simpler terms to remember it easily, Cash flow is the increase or decrease in money over
a period of time.

Kini skl, I don’t know if you had read the book Rich dad Poor dad ni Robert Kiyosaki pero nabasa ko
sya during pandemic and one my major takeaways sa book nayun is on how crucial cash flow is on
helping an individual (ourselves) towards financial freedom.
Sa book gidescribe niya Cashflow quadrant on how different people comprehend cash flow and how
will money works for them.
pagkarememner ko sinabi niya na Cash flows are made of assets and liabilities and one of the key to
achieve financial success is to distinguish what assets and liabilities truly are, now simply put “assets
are the ones who put money IN our pocket, whilst liabilities are the ones who put money OUT of our
pocket”.

Now going back in our topic, in engineering

Cash flows are a fundamental tool in engineering economic analysis. As it is a series of expenses and
credits that run over the lifetime of a project.

Example is on having a project, transactions are inevitable for they can take place at any point during
a project. Transactions can be: 1. Cost (such as expenses and payments) 2. Receipts (credits and
revenues).

Representing transactions as cash flows makes it easier to keep track of the important information
included in the transactions.

There are two characteristics of financial transactions that are indicated in cash flows:

 Value- the magnitude of the transaction being described. This is dependent on two factors: the
amount of money or currency changing hands and the direction in which the money is flowing.
We represent financial gains as positive in value, and financial loses as negative in value.

the magnitude of the transaction being described. This is dependent on two factors: the amount of
money or currency changing hands (a peso value) and the direction in which the money is flowing
(kung positive or negative ba sya). We represent financial gains as positive in value (katulad ng sinabi
ko kanina under sa reciept such as ung credits and revenues), and financial loses as negative in value
(ito ung mga cost such as ung expenses and payments).
 Timing- the time period in which the cash flow occurs. Often, periods are set to coincide with
interest periods. Typically, periods are in increments of months, quarters, semi- annual, or
annual but other time increments may also be used.

(to futher comprehend this concept let’s use an example)

Example:

Riley lends his friend Chris $ 10.00 on January 1, and Chris pays back the $10.00 on February 1.

There are two transactions in this example: the initial lending on January 1, and the repayment on
February 1.
Important to note the two sides every transaction, so the cash flow directions DEPEND on the POINT
OF VIEW taken.

Table 1 describes Riley’s perspective

Table 2 describes Chris’s perspective

As you can observe changing perspective changes the signage of the cash flows. Ra calling rich dad
poor dad assets and liabilities, On January 1 the $10.00 was a liability for Riley whilst an asset for
Chris. But on Feb. Balikatad na ky $10.00 is already an asset of Riley whilst it is a liability for Chris.

2. CASH FLOW DIAGRAMS

Cash flow diagrams are simple graphical representations of financial transactions.

Katulad ng nasa table form kanina sa cash flow diagrams pinapakita din nya ung transactions in
graphical form

Example (insert fig.)

Basic rules for creating cash flow diagrams:

1. Time is presented by a horizontal line marked with the number of periods in the analysis.
Itong 0-10 nakalagay indicates the time interval

2. The horizontal position of each arrow indicates the timing of that cash flow.
Ung mga arrows dito indicate when nato na obatain ang ing ani na amount example is at month or
year 6 naka kuha tag $550.

3. Upward arrows represent positive cash flows, also known as inflows, income, or receipts.

4. Downward arrows represent negative cash flows, also known as outflows, disbursements, or
expenses.

5. Each arrow represents the net cash flow in that period. There is only one cash flow arrow for each
period representing this net value.

Example: (from Riley and Chris)

From the previous example:

Riley lends his friend Chris $10.00 on January 1, and Chris pays back the $10.00 on February 1.

(insert diagram) as you can observe the diagrams give the same info as tables we did before.
Some of the advantages of using a diagram than constructing a table are:
1. it is less time-consuming ky as you can see it is faster to create a diagram than a table by looking at
this two fig.
[Link] ma emphasize yung movement of money as you can see in this fig we can simply determine
kinsa ang nagka asset of liability during a time interval.
This example basic representation ky wla paman interest na gipatong si Riley ky chris wla pay net
profit ug di nato pa madetermine kung kinsa ang naka gain or loss sa ilahang duha.

A much more complex is this example (insert fig)