Ensure that debt is being repaid according to seniority of the tranches. This is efficiently coded using the SUMIF formula based on calendar year, financial year or operating year. The addition of an annual cash flow waterfall significantly improves the usability of the model, as it facilitates analysis at a high level. Screenshot 2: an illustration of a cash flow statement Points to consider in cash flow waterfall modelling The term sheet specifies the seniority of certain categories, such as reserve accounts. When compared with the structure of the cash flow waterfall in screenshot 1, the differences are easily identified. Screenshot 2 is an illustration of a cash flow statement. The cash flow statement provides information that can be readily analysed from an external investor’s perspective, whereas the cash flow waterfall provides information that can be easily analysed by the banks. The cash flow waterfall clearly shows the amount of cash flow at each level as described in the term sheet. The cash flow statement does not order cash flows in order of seniority, thereby making it less efficient when analysing a project’s debt repayment ability. The cash flow statement presents information in three key categories: Cash flow from operations cash flow from investing and cash flow from financing, which are standalone from one another. Screenshot 1: A typical cash flow waterfall Comparison of a cash flow statement and a cash flow waterfall Grouping of cash flows It clearly shows that by going down the page, you are able to identify the timing and seniority of each cash flow and the highlighted key cash flow lines. Each category will be separated into individual line items, such as individual operating costs. Screenshot 1 is a high level illustration of a typical cash flow waterfall. Cash flow available to equity to calculate distributions.Cash flow available for debt service reserve (or other reserve) account (DSRA).Cash flow before funding: This line is useful as a quick check against funding, to ensure that initial construction costs are being met by debt or equity.
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Cash flow available for debt service (CFADS): This is the most significant line which drives all debt repayment calculations and ratios, including debt service coverage ratio (DSCR), project life coverage ratio (PLCR) and loan life coverage ratio (LLCR).Key lines of the cash flow waterfall are: The cash flow waterfall is used to calculate key cash flow lines, which are used in different parts of project finance modelling. Debt service: Principal repayments and interest paid.Expenses: Operating expenses and capital expenses.Revenues: Operating revenues and other income.
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The main categories of a cash flow waterfall, in order of occurrence are: Cash flow waterfall categoriesĪ cash flow waterfall is simple in its approach, as all cash flow items are placed in the order in which they occur. The theory course of project finance is also covered in the Concepts & Applications course.
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The concept of cash flow waterfall is also covered in more details in the Corality Academy’s project finance modelling training course, and in further detail in the advanced debt modelling and project finance course. The cash flow waterfall becomes especially important when illustrating debt repayments of many debt tranches with reducing seniority. The cash flow waterfall ensures that each cash flow item occurs at the correct seniority to other items. In project finance, a project’s cash flow is summarised using a cash flow waterfall, which shows the priority of each cash inflow and outflow.
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#Cashflow 202 5 audio cds how to
This tutorial outlines key categories of cash flow items and how to present the cash flow waterfall in comparison to the cash flow statement in a project finance model.