კონფერენცია

∘ Besik Bolkvadze ∘
ANALYTICAL IMPLICATION OF CASH FLOWS IN COMPANIES’ FINANCIAL DECISIONS

Summary

The article is dedicated to the issues of corporate finance as follows: cash flow statement, qualitative analysis of cash flows, quantitative analysis of cash flows, company’s liquidity position, cash flows analytical instruments, the importance and inevitability of assessment of cash flow statement. The work suggests author’s opinions towards abovementioned topical issues.

In transition phase of the economy of Georgia the accounting, reporting and auditing systems of the country experienced significant systematic changes and challenges from reformation point of view according to IFRS, Georgia-EU DCFTA and the country’s legislation.

Cash flow statement is the base of the liquidity position of any business entity. It should provide the companies stakeholders with such valuable information as: Potential of cash flow generated; ability of covering of liabilities; scale of operating activity; capability of utilization of investment potential; level of dependence on external sources of financing; causes of differences between net income and net cash flow etc. The structure and regulation of cash flow statement is determined by the International Financial Reporting Standards, namely by the IAS 7 – Statement of Cash Flows.

CFS is the main document of cash flow management of business entities that requires taking into consideration the following factors: 1. Proper relation of cash flows positions to corresponding segments (operating, investing and financing activities); 2. Adequate preparation of cash flow statement according to direct or indirect methods; 3. Relevant analysis and interpretation of cash flows by qualitative and quantitative approaches.

The Author considers the researchable problem of cash flow managing from qualitative and quantitative point of view and highlights the role and importance of those characteristics in companies’ economic performance. In particular, qualitative analysis encompasses the following factors: cash flows as the basic liquidity indicator and instrument of assessment of investing, net cash flows as the analytical tools from operating, investing and financing activities and their positive and negative meanings, historic cash flows, cash flow quality, impact of exchange rate on cash flows etc. Regarding the quantitative characteristics the cash flow ratios are considered as follows: Free Cash Flow Ratio, External Financing Index Ratio, Capital Expenditure Cover Ratio, Cash Dividend Cover Ratio, Cash Flow to Total Assets Ratio, Cash Flow to Debt Ratio, Cash Flow Margin Ratio, Cash Flow to Net Income Ratio.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Besik Bolkvadze ∘ ANALYTICAL IMPLICATION OF CASH FLOWS IN COMPANIES’ FINANCIAL DECISIONS Summary The article is dedicated to the issues of corporate finance as follows: cash flow statement, qualitative analysis of cash flows, quantitative analysis of cash flows, company’s liquidity position, cash flows analytical instruments, the importance and inevitability of assessment of cash flow statement. The work suggests author’s opinions towards abovementioned topical issues. In transition phase of the economy of Georgia the accounting, reporting and auditing systems of the country experienced significant systematic changes and challenges from reformation point of view according to IFRS, Georgia-EU DCFTA and the country’s legislation. Cash flow statement is the base of the liquidity position of any business entity. It should provide the companies stakeholders with such valuable information as: Potential of cash flow generated; ability of covering of liabilities; scale of operating activity; capability of utilization of investment potential; level of dependence on external sources of financing; causes of differences between net income and net cash flow etc. The structure and regulation of cash flow statement is determined by the International Financial Reporting Standards, namely by the IAS 7 – Statement of Cash Flows. CFS is the main document of cash flow management of business entities that requires taking into consideration the following factors: 1. Proper relation of cash flows positions to corresponding segments (operating, investing and financing activities); 2. Adequate preparation of cash flow statement according to direct or indirect methods; 3. Relevant analysis and interpretation of cash flows by qualitative and quantitative approaches. The Author considers the researchable problem of cash flow managing from qualitative and quantitative point of view and highlights the role and importance of those characteristics in companies’ economic performance. In particular, qualitative analysis encompasses the following factors: cash flows as the basic liquidity indicator and instrument of assessment of investing, net cash flows as the analytical tools from operating, investing and financing activities and their positive and negative meanings, historic cash flows, cash flow quality, impact of exchange rate on cash flows etc. Regarding the quantitative characteristics the cash flow ratios are considered as follows: Free Cash Flow Ratio, External Financing Index Ratio, Capital Expenditure Cover Ratio, Cash Dividend Cover Ratio, Cash Flow to Total Assets Ratio, Cash Flow to Debt Ratio, Cash Flow Margin Ratio, Cash Flow to Net Income Ratio.