Cash Flow Analysis & Savings Advice
If you’re like most people, you weren’t given a manual for:
- How much to save
- Where to put it
- The tax implications
- What it’s going to turn into the coming years
You also don’t have instructions on how to analyze your cash flow.
- Go through bank statements
- Separate expenses accordingly
- Identify areas of concern or opportunity
When you engage us in a professional relationship, we can bring this knowledge to the table (or your computer). Imagine doing this right for decades versus not doing this right for decades. It will likely have a bigger impact overall on your finances compared to one smart investment or just making more money every year. Speaking of making more money, when your income goes up, do you save more or spend more? A little of both?
Most of our clients need some kind of order to follow, a system to keep them in check, or just some simple rules to make sure they don’t show up to retirement having squandered so much cash on fancy stuff that now doesn’t seem so fancy after all. I’m not saying you can’t enjoy yourself, but there’s a balance we can help you achieve. There’s nothing like having a good life while knowing your planning for the continuation of a good life, however long it may be.
The possibility of replacement projects must be taken into account during the process of capital budgeting and subsequent project management. A replacement project is an undertaking in which the company eliminates a project at the end of its life and substitutes another investment. This replacement project can serve the purpose of replacing an expiring investment with a new, identical one, or replacing an existing investment that is producing unfavorable results with one that management believes will perform better.
When analyzing a project, and ultimately deciding whether it is a good investment decision or not, one focuses on the expected cash flows associated with the project. These cash flows form the basis for the project’s value, usually after implementing a method of discounted cash flow analysis. Most projects have a finite useful life. Analysis can be undertaken in order to determine when the optimum point of replacement will be, as well as if replacement is a viable option in the first place. To accomplish this, one analyzes the cash flows of the current project in relation to the expected cash flows from the replacement project. Replacement project analysis tells a company whether the costs of a replacement project provide a suitable return on investment.
The net cash flows for a project take into account revenues and costs generated by the project, along with more indirect implications, such as sunk costs, opportunity costs and depreciation costs related to the project. All of these considerations taken together allow management to consider the project’s incremental cash flows, which are inflows and outflows the project produces over predictable periods of time. Discounted cash flow analysis should be undertaken for both the existing project and the potential replacement project. These analyses can then be used to compare the expected profitability of both projects; which will, in theory, lead management to make the right decision regarding the investments.