Small and Medium Enterprises (SMEs) are at the heart of economic development and job creation. 

Small and Medium Enterprises are also at the heart of commercial bank lending and leasing.

The primary purpose of this website is to announce a new framework for visualizing the cash flow of SMEs in terms of naturally recurring, sustainable cycles.  

Cash Cycle Theory starts with the premise that to understand a company’s cash flow it is necessary to divide all cash flows into three or four natural cycles. This approach has shed new light on old issues, meriting publication in America's leading professional accounting and banking journals. Click on the title of the following articles--listed by date of publication--to read or download for free.  Following the articles is reference to the book Cash flow 3.0, which explains Cash Cycle Theory in full.  

The Missing Piece in Liquidity Calculations - why computing the "current portion of fixed assets" would provide a more accurate picture of financial health (April 2012) 

The first startling discovery was that working capital and the current ratio routinely understate liquidity because there is an account missing from the balance sheet: CPFA--the current portion of fixed assets.The breakthrough concept of CPFA was first reviewed by and cleared the conservative board of the nation's premier journal of accountancy.

   The RMA Journal

Negative Working Capital is not Negative - Heresy or Revelation?         (December 2015)

The discovery of CPFA, the Current Portion of Fixed Assets, reveals two levels of liquidity, detailed respectively in two articles in America's premier banking jouurnal. The first pictured at left, reveals that “negative working capital” is a false indicator of illiquidity.

NEW!!   Watch You Tube Video here !!

Trading Capital vs Working Capital - Two Tiers of Liquidity  (October 2017)

The sequel explores the new concept of Trading Capital and applies it to resolve AT&T's liquidity paradox. 

Why Maintenance Capex should not be deducted from operating cashflow  October 2018

The third RMA Journal article challenges a practice that has crept into some analysts’ cash flow spreadsheets, as the title suggests. Mcapex is an important use of cash that must be taken into cash flow analysis, however, the adjustment was excessive. M-Capex must be analyzed in its natural balance sheet cash flow cycle, matching the investment cash flow with financing cash flows. Deducting all of M-Capex from operating cash flow overstates the deduction which leads to missed lending opportunities and even lost clients. (click the title to read/download; If you are looking for the base worksheet identified in the article, click here:Sam's Trucking foundation worksheet(pdf

An Argument for Restoring the Importance of Balance Sheet Cash Flows

The Statement of Cash Flows is biased toward operating cash flow. That may be useful for security analysts, but the answers to questions pertinent to commercial bank lending are mostly found on the balance sheet: How much debt is due this period? What assets are to be used--converted back to cash--to repay that debt? Is the debt structured to match the life of the assets? Are replacement cycles sustainable? Is the total debt burden excessive? What is the potential for growth? 

It is time to resurrect the importance of Balance Sheet Cash Flows--investment cash flows and financing cash flows--especially those the SCF leaves out! 

The Book: 

Cash Flow 3.0--Advances in Cash Flow Lending based on Sustainable Cycles

This book provides the complete framework, practical applications, and the benefits of cash cycle theory. Click the title to see the Table of Contents.  

Available: Amazon 

Presentations/Seminars: The author is available to conduct brief speaker presentations (gratis) for business associations and university courses, or multi-day seminars covering the complete cash flow cycle theory. Click the "seminar" tab above to see a sample outline. 

The seminar--Cash Flow 3.0--was launched in 2014 at MegaBank, in Jakarta. Thanks to my host Edison Mawikere and co-instructor Detamore Pussung.   

This is the professional website of Stephen M. Bartoletti
Senior Banking Advisor and specialist in SME lending.