Financing Cashflow

This article explains how Financing cashflows work in Model Reef.

You will learn:

• What counts as Financing cashflow.

• How loans, equity injections and dividends are represented.

• How Financing cashflows link to capital structure and valuation.

Financing cashflows show how the business is funded and how it returns cash to owners and lenders.

1

Components of Financing cashflow

In Model Reef, Financing cashflows typically include:

• Debt drawdowns

  • Cash inflows from new or additional borrowings.

  • Increase loan balances on the Balance Sheet.

• Debt repayments

  • Cash outflows when principal is repaid.

  • Reduce loan balances on the Balance Sheet.

• Equity injections

  • Cash inflows from owners or investors.

  • Increase share capital and cash.

• Dividends paid

  • Cash outflows to equity holders.

  • Reduce retained earnings and cash.

Note: Interest paid is treated as an Operating cashflow, not a Financing cashflow.

2

Link to Liabilities and Equity

Financing cashflows are the cash side of changes in Liabilities and Equity:

• Loan balances move with drawdowns and principal repayments.

• Equity balances move with new equity in and dividends out.

• Retained earnings reflect accumulated NPAT net of dividends.

The Cashflow Statement makes it clear how funding arrangements affect the cash position and capital structure over time.

3

Financing cashflow and valuation

Financing cashflows are central to equity and project returns:

• Equity IRR uses equity cash in (injections) and equity cash out (FCFE and dividends).

• Project IRR may combine both debt and equity flows depending on design.

• Leverage changes through debt drawdowns and repayments can increase or reduce equity risk and return.

Model Reef lets you explore different financing strategies by changing Liability and Equity variables and examining the resulting Financing cashflows.

4

Analysing Financing cashflow

You can analyse Financing cashflows by:

• Inspecting the size and timing of debt transactions.

• Reviewing equity rounds and dividend policies.

• Comparing financing patterns across scenarios.

• Checking consistency with lender covenant and investor expectations.

This supports capital structure planning and transaction analysis.

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