Consistency in Creation

In creating a cash flow model, in the nature of a forecast or a projection, the assumptions used must be internally consistent. For example:

• The conditions assumed with respect to future sales should also be considered in estimating the cost of those sales.

• The adequacy and sufficiency of plant capacity, labor and other resources necessary to support the estimated sales should be considered in conjunction with the estimated sales.

• Any capital expenditures must be appropriate under the circumstances.

• The applicable taxes must be provided for.

• The need for financing (and whether such financing shall be long term or short term) must be considered.

Support for Assumptions

All of the assumptions in creating your cash flow model (be it forecast or projection) must be suitably supported.

• In an EXISTING BUSINESS, the support for the assumptions utilized must begin with the historical data available from the business' own operating records. Trends and patterns from the historical data are an appropriate basis to support the assumptions used.

• In a NEW BUSINESS, the assumptions utilized must be based upon industry data, and analysis of operations of companies similarly situated, market surveys, and/or general economic analysis. Industry data may be from either public or private data bases. There are public sources available for industry data.

CF provides the user with a great deal of flexibility in the creation of a cash flow model and assists you (upon completion of your model) in reporting a forecast or projection of the business which is the best as can be prepared.