Cash Waterfall Overview

This article explains the Cash Waterfall in Model Reef.

You will learn:

• How the Cash Waterfall is structured.

• How it bridges P&L performance and cash movements.

• How it is used for investor, board and lender communication.

The Cash Waterfall is often the most useful single view for investors.

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1. Purpose of the Cash Waterfall

The Cash Waterfall is designed to:

• Show how operating performance (Revenue, COGS, Opex, Staff) flows through to cash.

• Make working capital movements visible via a clear bridge.

• Highlight the impact of capex, debt and equity flows on cash.

• Provide a clean path from EBITDA to free cashflow to equity.

It combines elements of the P&L and Cashflow Statement into a single structured view.

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2. Structure of the Cash Waterfall

A typical waterfall in Model Reef contains the following sequential lines:

1

Revenue

Top-line inflow reflecting sales.

2

COGS

Cost of goods sold, deducted from Revenue.

3

Opex

Operating expenses (excluding staff if shown separately).

4

Staff costs

Payroll and related staff expenses.

5

EBITDA

Earnings before interest, taxes, depreciation and amortization — mirrors the P&L.

6

Tax paid

Cash taxes paid, adjusting EBITDA for actual tax outflows.

7

Change in net working capital

Movement in receivables, payables, inventory — captures timing effects.

8

FCFF type operating cashflow line

Operating cashflow after tax and working capital adjustments (free cashflow to the firm style).

9

Capex

Capital expenditures (investing cash outflows).

10

Interest paid

Cash interest payments on debt.

11

Debt drawdowns and repayments

Financing cashflows reflecting new borrowings and repayments.

12

Equity injections

New equity invested into the business.

13

Dividends

Cash distributed to equity holders.

14

Net cash movement

Net change in cash for the period, reconciling inflows and outflows.

15

Closing cash

Ending cash balance that matches the Balance Sheet.

Exact line labels may vary slightly depending on configuration, but the logic is consistent.

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3. Relationship to P&L and Cashflow Statement

The Cash Waterfall:

• Uses P&L values down to EBITDA.

• Uses cash based values for tax, working capital, capex, interest, debt and equity movements.

• Reconciles both accrual and cash perspectives in one place.

It does not replace the Cashflow Statement but provides a more investor friendly view of the same underlying information.

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4. Using the waterfall in scenarios and reporting

You can:

• Compare waterfalls across scenarios.

• Use waterfalls at different levels of the branch structure.

• Include waterfalls in dashboards and board or investor packs.

• Export waterfalls as images or PDFs for presentations.

Because the waterfall is generated from the same engine as the P&L and cashflows, it stays accurate even as assumptions evolve.

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