Notice, the inventory roll has no impact on cash disbursements directly – only indirectly via the AP roll-forward (below). The purchase forecast is arrived at by forecasting inventory turnover / or days of inventory on hand (DIOH). The roll-forward adds inventory purchase forecasts and subtracts COGS forecasts (projected on the income statement). Historical inventory will usually come from a company’s inventory ledger. Once combined with revenue forecasts, cash receipt projections can be made: Forecasts for future A/R driven off days sales outstanding (DSO) and even invoice-level assumptions for larger customers. Opening balances will usually come from A/R aging. Roll-Forward Summary Accounts receivable roll-forward The TWCF is designed to increase the level of transparency and trust between management, creditors and other stakeholders. Securing this financing is almost always supported by credible 13-week cash flow forecast. The reality for many liquidity-constrained companies under financial distress is that even if they are viable as a going concern in the long run, they must convince prepetition lenders or a third party to extend debtor-in-possession (DIP) financing to bridge to a medium term and ultimately a long term plan. M&A: Seek a buyer or strategic investorĪ credible TWCF often quite literally is the difference between survival and Chapter 7 liquidation.File for bankruptcy (Chapter 11 or Chapter 7).In corporate restructuring and bankruptcies, the 13-week cash flow model (TWCF) is a critical tool to understand the circumstances, which underpin the decision-making process (and guidance) provided by restructuring professionals on behalf of their client(s).īy identifying the immediate cash flow needs at the most granular level, the model helps distressed firms evaluate the immediate impact of a variety of possible operational, financial, and strategic remedies: Operational How to Interpret the 13-Week Cash Flow Model?
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