Dynama+ Assumptions

The concepts underpinning the Dynama+ program

The core of Dynama+ is a ten year livestock schedule that shows the annual flow of cattle through the herd. The flow of cattle and the performance described for the herd drives all of the outputs of the model.

Measures of profit and cash flow in Dynama+

The Dynama+ program calculates a range of financial measures that include both cash and non-cash components in their construction. The key measures calculated are net worth, cash flow for debt service, net income and return on total capital (in dollars and percent). The relationships between these measures and what they mean is discussed in detail in the appendix of this user manual. In summary:

• Net worth is calculated as the total asset value less total debt as at a particular date. Net worth is also known as “equity” and may be expressed as a percentage.
• Cash flow for debt service is calculated by deducting all cash outgoings (except loan service) from all cash inflows. Note that this differs from the definition of cash flow in the discussion of accounting measures in the appendix, which is net of debt service. In Dynama+, the cash flow for debt service is put first towards the service of term loans, with any surplus going into the working accounts and any shortfall funded from working accounts.
• Cash in and cash out include all cash components of the net income calculation, plus items of a private or capital nature that are not part of the net income calculation. The latter include family living expenses and taxation, capital expenditures, receipts and other capital transactions including gifts given or received and transfers to or from other accounting entities.
• Depreciation and livestock inventory change, which are part of the net income calculation, are not included in the cash flow calculation since they are not cash.
• Net income is defined in Dynama+ as being equal to gross income, including the increase or decrease in livestock inventory value, less all variable and fixed costs including interest and depreciation. Net income includes some non-cash items (inventory change and depreciation) and excludes some cash items (tax, family expenses, capital transactions and loan reductions). Net income is thus not the same thing as net cash flow.
• Depreciation is the annual provision made in profit budgets to spread the cost of capital items such as vehicles, machinery and fences over the period of use of these items. Such capital costs, rather than being charged against net income as they occur, are smoothed over time and charged annually as depreciation. These capital costs will show up in a cash flow budget (and in Dynama) as lump sum outlays. If funded by borrowing, there will also be a cash inflow as the loan is received, and a series of outflows as the loan is repaid. Leased capital does not show up in the depreciation calculation (or in the balance sheet) but appears as a lease payment in the calculation of net cash flow or net income.

Budgets constructed in Dynamaplus need to observe the limits on stocking rate (adult equivalents), working account balances and total debt that apply in the real world of the beef enterprise being modelled.