Optimization of the company's cash flow

) LIMITATIONS OF THE METHOD.
This method leads to significant results when using mean values for the year in question, and not the values from the
balance sheet. Indeed, does not represent that the particular situation of the day of the preparation of the balance
sheet, but in no case a
Average. In other words, it would be risky and dangerous to interpret a result based on values extracted from the
balance sheet. But the main criticism that can be made is that this calculation assumes a perfectly regular activity
over time. However, even without mentioning the firms the seasonal operation, all companies are experiencing
fluctuating more or less pronounced, more or less regular cycle.
Changes in sales and purchases have the effect to oscillate the working capital needs. Therefore, this method
provides no knowledge of the evolution of the real needs for working capital. Therefore, it does not operate an
efficient distribution of the views of the solvency between bearing (or permanent resources for the financing of the
operating cycle) and 'passive cash' (or short dull of cash resources).
If real working capital of the company is equal to its average requirements, excesses cash at certain times,
interspersed with shortcomings at other times of the year occur. Even where these fluctuations would be provided
through a cash budget, it is unlikely that the financing of the operating cycle is optimum. Without perfect knowledge
of changes in the needs during the operating cycle, this optimum we repeat, cannot be achieved. Funding cannot be
considered, nor be found ignoring the nature and evolution of the particular need to which it relates; the actual cost
will not be more in these conditions, appreciated.
II - ANALYSIS OF THE LIQUIDITY OF THE FIRM BY THE METHOD OF RATIOS.
The ratios method provides a second category of instruments for measuring the financial balance.
The cash of a firm, i.e. its security situation, depends on inputs and outputs of funds from the transformation of the
elements of assets and liabilities. The confrontation of the liquidity of jobs and the chargeability of the resources is a
series of indices for assessing the financial balance. However, the ratios method has a number of limitations that hold
both its fundamental principles, and how to use it.
A - RATIOS OF FINANCIAL SECURITY.
Traditionally, there are the ratios of long-term financial security, or ratios so-called "solvency" and the ratios of
financial security in the short term, or so-called "liquidity" ratios.
1 - THE SO-CALLED RATIOS "SOLVENCY", OR LONG-TERM FINANCIAL SECURITY.
Solvency is here understood as the ability of a company to pay its debts in the medium and long term.
From this point of view, a company is solvent if its assets are greater than its debt; in other words, if it’s net position
is positive. Although very general and does not allow to give a measure of immediate capacity of regulation, this
definition is useful for identifying the degree of third parties including Bankers Trust, to the firm.
In this regard, it uses three types of ratios: working capital ratios, ratios of financial autonomy and the General
solvency ratio.
1.1 - WORKING CAPITAL RATIOS.
They are numerous and complement each other.
Ratio:
CURRENT ASSETS / SHORT TERM DEBTS
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