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Quick Test on the 6 Ns from Taxable Income to Recurring Cashflow

Here is a quick puzzle to test your memory on how to get from taxable income on any tax return to recurring cashflow available to pay debt, one of the many tricks you learn in my tax return analysis training for lenders.

First see if you can remember them from the clues below…

From Taxable Income to Historical Cashflow:
1. N _ _ _ _ _ _ _ 
Example: Child Support or Tax-exempt interest

2. N _ _ _ _ _ _ _ _ _ _ 
Example: 50% Disallowed Meals

3. N _ _ _ _ _ _
Example: Depreciation

The next three get you from historical cashflow to recurring cashflow.

4. N _ _
Example: Purchased a rental they did not have last year.

5. N _ _ _ _ _ _ _ _ _ _
Example: Flood repairs

6. N _ _ _ _ _ _ _ _ _ _ _ _
Example: This is a contract receivable that you do not need to qualify the borrower.

Follow the link and look for the words. You can get help by clicking on the ‘Show Words’ button, but that wouldn’t be nearly so much fun!

Compete with your fellow lenders to see who can get it done in the least amount of time.

If you need the review, check page 1-12 in the Resource Guide, “Tax Return Analysis 2007 Forms: Essentials and 1040 Review” or page 11-2 in “Tax Return Analysis: Partnerships, Corporations and LLCs” will help.

Or watch the free tutorial:
Green Legos, Six Ns and a Map to Tax Return Analysis!

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.