Cash Flow Lending: Principles Based on Sustainable Cycles (Cash Flow Lending to SMEs) Book Description:

Cash Flow Lending replaces the book Cash Flow 3.0, enhanced by a decade of academic and professional conversation about liquidity: “Is the Current Portion of Fixed Assets a Current Asset?” Other new content includes recycling cash flow (Maintenance Capex), practical cash flow problem solving, and FASB’s initial response.

Cash Flow Lending introduces cutting-edge advances in cash flow analysis and cash flow lending. Bold statement? Consider this: Traditional analysis says that AT&T is illiquid because it reports a multi-billion dollar negative working capital. Yet AT&T pays it trade creditors on time and is rewarded with top credit ratings. There is a flaw in our textbook measures of liquidity: an account missing from the balance sheet! The flaw was first made public in 2012 in the Journal of Accountancy: “The Missing Piece in Liquidity Calculations: How reporting the Current Portion of Fixed Assets corrects the miscalculation of working capital,” and in America’s leading banking journal (The RMA Journal, 2016) “Negative Working Capital is not Negative–Heresy or Revelation?” (articles available at

The Current Portion of Fixed Assets (CPFA) is one of several discoveries that emerge from a framework that views cash flow in natural, sustainable cycles. New primary coverage ratios sharpen the measurement of debt repayment by pinpointing the cash flow that should repay a loan within its natural cycle. Traditional measures like the Debt Service Coverage Ratio (DSCR) and the (flawed) Current Ratio are “hybrid ratios” that include cash that flows from other cycles. Cross-cycle cash flow explains how AT&T pays its creditors (cross-cycle repayment) despite its negative working capital, and answers old questions like, “Can a term loan be made to finance a permanent increase in working capital?” (cross-cycle financing). Cash flow cycles illuminate the causes of cash flow problems and the remedies.

Correcting the measures of working capital and liquidity is not just an academic curiosity but a practical necessity. Small and Medium Enterprises (SMEs) are not as fortunate as AT&T. Banks routinely, and erroneously, deny credit to SMEs that report a negative working capital, a misleading sign of illiquidity.

Publisher‏:‎Independently published (June 18, 2021)
Paperback‏:‎180 pages
Item Weight‏:‎11.7 ounces
Dimensions‏:‎6 x 0.41 x 9 inches

Cash Flow Lending: Principles Based on Sustainable Cycles (Cash Flow Lending to SMEs)

Price: $17.95

(as of Jan 27,2022 17:34:15 UTC )


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