CASH FLOWS FOR CONSTRUCTION COMPANIES推荐.pdfVIP

C H A P T E R 14 Cash Flows for Construction Companies In this chapter you learn how to prepare an annual cash flow projection for a con- struction company. This is necessary to ensure that the company has sufficient cash for the upcoming year. Should a financial manager find that there are insufficient funds, he or she will have time to arrange for the necessary financing to provide the necessary funds. Annual cash flow projections for a company are prepared by pro- jecting the annual revenues and construction costs for the construction company by combining the cash flows from the individual jobs or based on historical data. The financial manager must then combine the projected revenues, construction costs, the general overhead budget, and the projected income taxes with the company’s available cash to determine the cash needs of the company. Companies should not wait until the need for cash arises but should be actively looking into the future, trying to anticipate the need for cash well in advance of the arising need. Waiting for the need to arise is dangerous for two reasons. First, it takes time to arrange for the necessary funding. If one waits until the need arises the company must struggle financially while the financing is obtained. Second, financing is easier to get when a company does not need it. For compa- nies with a surplus of cash, the preparation of a cash flow projection allows the company to wisely plan the investment of its surplus cash. After setting target levels for revenues, gross profit margin, general overhead costs, and profit from operations, management should prepare a cash flow projection to determine the amount of cash needed to meet