Moody’s PACED: Cash Flow Drivers
| Key Drivers | Primary Ratios | Secondary Ratios | |
| Profitability | – Volume of Sales – Sales price – Operating Margins – Tax | – Sales growth – EBIT margin – ICR = EBIT / Interest Expense | – Gross profit – EBITDA margin |
| Asset Cash Conversion | – Volume of sales – Time – Bargaining power of customers and suppliers | – Net working assets / sales | Turnover ratios – Days payable – Days inventory – Days receivable |
| Capex | Mandatory Capex: – Time delay – Cost overruns – Completion risk – Impact on volume and margins – Discretionary Capex | – Physical assets utilisation | – Gross capex (PPE) / depreciation |
| Equity | – Access to capital – Cost of equity – dividend policy* | – Net worth / total assets | – Quick ratio – Current ratio – Tangible net worth / total assets** |
| Debt | – Cost of debt – interest* – Debt maturity profile – Cash financial FX losses – Access to debt markets – Contingent liabilities | – Operating cash flow / debt** – Debt** / EBITDAR | – Debt / Tangible Net Worth |
*Financial charges
**These ratios need to be adjusted for off balance-sheet and other liabilities
Moody’s PACED: Applied to a transport company Navette
| Key Drivers | ||
| Operating Cash Flow | Profitability | – Profitability of related parties – Declining profits (~ 500k) – Concentration of rental income (will they really realise the projected incremental rental income) |
| Operating Cash Flow | Asset Cash Conversion | – Due from related parties à 75% of equity buffer – Ringfence future cash inflow (tenants pay to us directly) – Step up occupancy ratio requirement over time |
| Investing Cash Flow | Capex | – Maintenance capex – cranes, automated carpark – Economic life of cranes – Planned capex for heavy-asset company |
| Financing Cash Flow | Equity | – Value of assets –> affect LTV – Gross development value – Sufficient enough to buffer the time to find tenants? – Equity buffer of credit bases |
| Financing Cash Flow | Debt | – DSC before and after – Structuring the repayment to match cash inflow – Elasticity of AP and committed loans from banks – Existing leverage already very high – Existing bank facilities and proposed repayments |
