Read the document carefully before responding
Please respond if you can answer in 10-12 hours
d2 is you have to answer
doc mat is material-please read material too
Total 1000 words
Total 1000 words( please follow instructions carefully)
paper 1-part 1-300-350 words
paper 2-part 2-200-250 words
paper 3-3 responses-150 words response each (3 responses-450 words)
Write 300-350 words for part 1, Write 200-250 words for part 2 and respond to three articles with 150 words each.
Part 1: Importance of Cash
Generating cash is the ultimate responsibility for managers today. Cash and cash flow are considered the “lifeblood” of a business.
How important has cash generation been for your current company or a prior employer? How is cash generation different from the concept of profit and loss (P&L) in accounting? Provide an example of how a company manages cash flow.
Part 2: Application of Concepts/Financial Analysis
Review the materials in the link below(Please refer to the other doc attached for material). Based on the materials presented in this link, discuss why financial analysis is important in the overall understanding of the financial performance of a firm. Be specific and give examples based on your experience or research.
3 Responses
Instructions
In your response to the discussions posted, consider comparing cash generation techniques at your company versus his or her company. Draw distinctions based on the industry and tell your colleagues why those distinctions are necessary for the management of cash flow.
Below are additional suggestions on how to respond to discussions:
Ask a probing question, substantiated with additional background information, evidence or research.
Share an insight from having read your colleagues postings, synthesizing the information to provide new perspectives.
Offer and support an alternative perspective using readings from the classroom or from your own research.
Validate an idea with your own experience and additional research.
Make a suggestion based on additional evidence drawn from readings or after synthesizing multiple postings.
Expand on your colleagues postings by providing additional insights or contrasting perspectives based on readings and evidence.
1) Respond to 1st article with 150 words
Cash flow is specified as a bi-directional flow of cash in a business which is in the form of profits and losses. This is a crucial factor for a company because it provides information on the nature of cash that includes positive cash flow and negative cash flow. In that, positive cash flow can enable business people to run the daily operations, payroll of employees, and to pay the taxes. This also helps companies to invest in various businesses that will turn into more revenue and employment.
The financial analysis in an organization can deliver the cash related information where experts use this information to assess the financial deals of business. Moreover, it provides information that mainly relates to the financial report which is necessary to do financial summaries for future goals. So distributing these fiscal reports will help the board to speak with the better-intrigued gatherings from outside. However, it provides good and better data that helps in assessing the best assets for a business enterprise (Khramov, 2012).
Cash is important for everyone because it is the one that is used as the mode of purchasing. This cash flow will be the net change of the company which helps in positioning the better periods. In this cash flow, positive and negative cash flow are two types which help in providing the information of cash flow with the practical data. In that, negative cash flow can lead to more cash outflow than receiving the money to an organization where it represents the loss of business. So cash flow is the procedure of an organization that represents outflow and inflow of cash.
Then the financial analysis is the process of analyzing that includes information about the interpretation and analysis of the various financial statements. This financial analysis will also involve examining the financial statements of an organization within better decisions. Those decisions are crucial because it is the one analysis which also provides information about the strengths and weaknesses of an organization and their business (Barnea, 1972).
References
Barnea, A. (1972). A Note on the Cash-Flow Approach to Valuation and Depreciation of Productive Assets. The Journal Of Financial And Quantitative Ana
Khramov, V. (2012). Asymmetric Effects of the Financial Crisis: Collateral-Based Investment-Cash Flow Sensitivity Analysis. IMF Working Papers, 12(97), 1. https://doi.org/10.5089/9781475502879.001
2) Respond to 2nd article with 150 words
Part – 1
Cash generation will be a crucial one to the organization where it is also easy to compare and measure. This cash generation is tangible because it measures in standard units only. Cash flow can help two different organizations and there is no matter how different they are because cash generation is significant, as it is complex to fake. There are also various ways to inflate profits and also to increase the asset values where they can help more in achieving success in an organized manner. Cash generation will be accepted as one of the better values around $40 million in cash. So cash and profit are different parameters in every business. This cash flow can also enable business organizations to focus on spending excess cash because of the profit of spending the amount when business gains better production, efficiency in selling products, and operating something within the estimated cost in an organization (Narayan & Westerlund, 2014).
Part – 2
Financial analysis of a certain company can enable in making a better investment decision that helps in reasoning. Most of the companies will decide to employ an analyst to analyze the weaknesses and strengths of the company because some of the companies may think to utilize financial consultants where they perform the financial analysis at only a particular time. This analysis helps people to analyze the financial weakness and strength of a company. However, it can help in assessing various types of assets that are owned by business organizations, and based on that, it helps in assessing liabilities. The financial analysis can provide better data on the cash position of a certain company and it also provides the information on all the debt that the company has. So, financial analysis is the process that helps in assessing the managerial significance of an organization (Khurana et al., 2006).
Reference
Khurana, I., Martin, X., & Pereira, R. (2006). Financial Development and the Cash Flow Sensitivity of Cash. Journal Of Financial And Quantitative Analysis, 41(4), 787-808. https://doi.org/10.1017/s0022109000002647
Narayan, P., & Westerlund, J. (2014). Does cash flow predict returns?. International Review Of Financial Analysis, 35, 230-236. https://doi.org/10.1016/j.irfa.2014.10.001
3) Respond to 3rd article with 150 words
Cash Flow and Financial Analysis
As Humans cant survive without water and food the same way any business cant survive without continuous cash flow. Generating cash is the primary goal of any business. In every business cash is required for various business operations like providing salary to employees, buying and investing in new facilities, and investing in R&D. If you want to check the growth and reputation of any organization cash is the primary parameter which is taken into consideration. Cash flow also signifies that how any organization pay their bills and expense on time (Tingbani, 2018). Cash flow during the life cycle of any business is important for the sustainability of any organization. For example, any organization provides and services based on specific terms and payments but if they dont receive their payment on time company will able to conduct their smooth operation. If they receive their payment on time it helps organizations in the smooth conduct of their organization. If financial terms profit and loss of any organization are measured by deducting operating expenses from revenue in that financial year. Cash generation is not related to the profit and loss of an organization. Cash flow helps the organization is paying the payment on time to their supplier, vendor and other regulatory agencies (Medda, 2019).
Any organization releases the financial statement to share the credibility in the market. If you are a financial person than evaluating all four financial statements of an organization helps customers, shareholders, and investors in understanding their operation and performance. Financial statement analysis can be useful for evaluating future financial performance. If you want to analyse the financial condition of any organization, you have to compare various financial ratios. Each and every ration have their individual importance so evaluating multiple ratios at a time will give a clearer picture of any organization. The financial statement also helps any organization to compare themselves with their competitors. Investors also invest in those organization which has sound financial a condition which is measured by financial statement (He, 2020).
References:
Afrifa, G. A., & Tingbani, I. (2018). Working capital management, cash flow and SMEs’ performance. International Journal of Banking, Accounting and Finance, 9(1), 19-43.
Lo, Y. C., & Medda, F. (2019). Bitcoin mining: converting computing power into cash flow. Applied Economics Letters, 26(14), 1171-1176.
Zhang, H., Zhang, Y., Zhou, S., & He, Y. (2020). Corporate Cash Holdings and Financial ConstraintsAn Analysis Based on Data on China at Company Level after the Global Financial Crisis. Emerging Markets Finance and Trade, 56(7), 1490-1503. Using Financial Statements to Understand a Business
Internal and external users rely on a companys financial statements to get an in-depth understanding of the companys financial position.
LEARNING OBJECTIVES
Explain how a company would use the financial statements to perform risk analysis and profitability analysis
KEY TAKEAWAYS
Key Points
By using a variety of methods to analyze the financial information included on the statements users can determine the risk and profitability of a company.
Financial statement analysis consists of reformulating reported financial statement information and analyzing and adjusting for measurement errors.
Two types of ratio analysis are performed, analysis of risk and analysis of profitability.
Analysis of risk typically aims at detecting the underlying credit risk of the firm.
Analysis of profitability refers to the analysis of return on capital.
Key Terms
reformulation: A new formulation
profitability ratio: measurements of the firms use of its assets and control of its expenses to generate an acceptable rate of return
ratio: A number representing a comparison between two things.
profitability: The capacity to make a profit.
The Role of Financial Statements
Internal and external users rely on a companys financial statements to get an in-depth understanding of the companys financial position. For internal users such as managers, the financial statements offer all the information necessary to plan, evaluate, and control operations. External users, such as investors and creditors, use the financial statements to gauge the future profitability and liquidity of a company.
The Balance Sheet: If an error is found on a previous years financial statement, a correction must be made and the financials reissued.
Financial Statement Analysis
By using a variety of methods to analyze the financial information included on the statements, users can determine the risk and profitability of a company. Ideally, the analysis consists of reformulating the reported financial statement information, analyzing the information, and adjusting it for measurement errors. Then the various calculations are performed on the reformulated and adjusted financial statements. Unfortunately, the two first steps are often dropped in practice. In these instances financial ratios are calculated on the reported numbers without thorough examination and questioning, though some adjustments might be made.
An example of a reformulation used on the income statement occurs when dividing the reported items into recurring or normal items and non-recurring or special items. This division separates the earning into normal earnings, also known ascore earnings,and transitory earnings. The idea is that normal earnings are more permanent and therefore more relevant for prediction and valuation.
Normal earnings are also separated into net operational profit after taxes (NOPAT) and net financial costs. In this example the balance sheet is grouped in net operating assets (NOA), net financial debt, and equity.
Types of Analysis
Two types of ratio analysis are analysis of risk and analysis of profitability:
Risk Analysis:Analysis of risk detects any underlying credit risks to the firm. Risk analysis consists of liquidity and solvency analysis. Liquidity analysis aims at analyzing whether the firm has enough liquidity to meet its obligations. One technique used to analyze illiquidity risk is to focus on ratios such as the current ratio and interest coverage. Cash flow analysis is also useful in evaluating risk. Solvency analysis aims at determining whether the firm is financed in such a way that it will be able to recover from a loss or a period of losses.
Profitability analysis:Analyses of profitability refer to the analysis of return on capital. For example, return on equity (ROE), is defined as earnings divided by average equity. Return on equity could be furthered refined as:
ROE = ( RNOA )+ (RNOA NFIR ) * NFD /E
RNOA is return on net operating assets, NFIR is the net financial interest rate, NFD is net financial debt and E is equity. This formula clarifies the sources of return on equity.
Income Statements
Income statement is a companys financial statement that indicates how the revenue is transformed into the net income.
LEARNING OBJECTIVES
Describe the different methods used for presenting data in a companys income statement
KEY TAKEAWAYS
Key Points
Income statement displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write offs (e.g., depreciation and amortization of various assets ) and taxes.
The income statement can be prepared in one of two methods: The Single Step income statement and Multi-Step income statement.
The income statement includes revenue, expenses, COGS, SG&A, depreciation, other revenues and expenses, finance costs, income tax expense, and net income.
Key Terms
intangible asset: Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched, or physically measured, and are created through time and effort, and are identifiable as a separate asset.
Income Statement
Income statement (also referred to as profit and loss statement [P&L]), revenue statement, a statement of financial performance, an earnings statement, an operating statement, or statement of operations) is a companys financial statement. This indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the top line) is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the bottom line). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.
The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time.
Income statement: GAAP and IRS accounting can differ.
Two Methods
The Single Step income statement takes a simpler approach, totaling revenues and subtracting expenses to find the bottom line.
The Multi-Step income statement (as the name implies) takes several steps to find the bottom line, starting with the gross profit. It then calculates operating expenses and, when deducted from the gross profit, yields income from operations. Adding to income from operations is the difference of other revenues and other expenses. When combined with income from operations, this yields income before taxes. The final step is to deduct taxes, which finally produces the net income for the period measured.
Operating Section
Revenue cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entitys ongoing major operations. It is usually presented as sales minus sales discounts, returns, and allowances. Every time a business sells a product or performs a service, it obtains revenue. This often is referred to as gross revenue or sales revenue.
Expenses cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entitys ongoing major operations.
Cost of Goods Sold (COGS)/Cost of Sales represents the direct costs attributable to goods produced and sold by a business (manufacturing or merchandizing). It includes material costs, direct labor, and overhead costs (as in absorption costing), and excludes operating costs (period costs), such as selling, administrative, advertising or R&D, etc.
Selling, General and Administrative expenses (SG&A or SGA) consist of the combined payroll costs. SGA is usually understood as a major portion of non-production related costs, in contrast to production costs such as direct labour.
Selling expenses represent expenses needed to sell products (e.g., salaries of sales people, commissions, and travel expenses; advertising; freight; shipping; depreciation of sales store buildings and equipment, etc.).
General and Administrative (G&A) expenses represent expenses to manage the business (salaries of officers/executives, legal and professional fees, utilities, insurance, depreciation of office building and equipment, office rents, office supplies, etc.).
Depreciation/Amortization the charge with respect to fixed assets/intangible assets that have been capitalized on the balance sheet for a specific (accounting) period. It is a systematic and rational allocation of cost rather than the recognition of market value decrement.
Research & Development (R&D) expenses represent expenses included in research and development.
Expenses recognized in the income statement should be analyzed either by nature (raw materials, transport costs, staffing costs, depreciation, employee benefit, etc.) or by function (cost of sales, selling, administrative, etc.).
Non-operating Section
Other revenues or gains revenues and gains from other than primary business activities (e.g., rent, income from patents).
Other expenses or losses expenses or losses not related to primary business operations, (e.g., foreign exchange loss).
Finance costs costs of borrowing from various creditors (e.g., interest expenses, bank charges).
Income tax expense sum of the amount of tax payable to tax authorities in the current reporting period (current tax liabilities/tax payable) and the amount of deferred tax liabilities (or assets).
Irregular items are reported separately because this way users can better predict future cash flows irregular items most likely will not recur. These are reported net of taxes.
Bottom Line
Bottom line is the net income that is calculated after subtracting the expenses from revenue. Since this forms the last line of the income statement, it is informally called bottom line. It is important to investors as it represents the profit for the year attributable to the shareholders.
Balance Sheets
A standard balance sheet has three parts: assets, liabilities, and ownership equity; Asset = Liabilities + Equity.
LEARNING OBJECTIVES
Identify the basics of a balance sheet
KEY TAKEAWAYS
Key Points
Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business calendar year.
The main categories of assets are usually listed first (in order of liquidity ) and are followed by the liabilities.
The difference between the assets and the liabilities is known as equity .
Balance sheets can either be in the report form or the account form.
A balance sheet is often presented alongside one for a different point in time (typically the previous year) for comparison.
Guidelines for balance sheets of public business entities are given by the International Accounting Standards Board and numerous country-specific organizations/companies.
Key Terms
balance sheet: A summary of a persons or organizations assets, liabilities and equity as of a specific date.
equity: Ownership, especially in terms of net monetary value, of a business.
asset: Something or someone of any value; any portion of ones property or effects so considered.
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a companys financial condition. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business calendar year.
A standard company balance sheet has three parts: assets, liabilities, and ownership equity. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity. Equity is the net assets or net worth of the capital of the company. According to the accounting equation, net worth must equal assets minus liabilities.
Balance Sheet Example
Types
A balance sheet summarizes an organization or individuals assets, equity, and liabilities at a specific point in time. We have two forms of balance sheet. They are the report form and the account form. Individuals and small businesses tend to have simple balance sheets. Larger businesses tend to have more complex balance sheets, and these are presented in the organizations annual report. Large businesses also may prepare balance sheets for segments of their businesses. A balance sheet is often presented alongside one for a different point in time (typically the previous year) for comparison.
Personal Balance Sheet
A personal balance sheet lists current assets, such as cash in checking accounts and savings accounts; long-term assets, such as common stock and real estate; current liabilities, such as loan debt and mortgage debt due; or long-term liabilities, such as mortgage and other loan debt. Securities and real estate values are listed at market value rather than at historical cost or cost basis. Personal net worth is the difference between an individuals total assets and total liabilities.
U.S. Small Business Balance Sheet
A small business balance sheet lists current assets, such as cash, accounts receivable and inventory; fixed assets, such as land, buildings, and equipment; intangible assets, such as patents; and liabilities, such as accounts payable, accrued expenses, and long-term debt. Contingent liabilities, such as warranties, are noted in the footnotes to the balance sheet. The small businesss equity is the difference between total assets and total liabilities.
Public Business Entities Balance SheetStructure
Guidelines for balance sheets of public business entities are given by the International Accounting Standards Board and numerous country-specific organizations/companies.
Balance sheet account names and usage depend on the organizations country and the type of organization. Government organizations do not generally follow standards established for individuals or businesses.
If applicable to the business, summary values for the following items should be included in the balance sheet: Assets are all the things the business owns, including property, tools, cars, etc.
Assets:
1. Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses for future services that will be used within a year
2. Non-current assets (fixed assets)
Property, plant, and equipment.
Investment property, such as real estate held for investment purposes.
Intangible assets.
Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents).
Investments accounted for using the equity method
Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.
Liabilities:
Accounts payable.
Provisions for warranties or court decisions.
Financial liabilities (excluding provisions and accounts payable), such as promissory notes and corporate bonds.
Liabilities and assets for current tax.
Deferred tax liabilities and deferred tax assets.
Unearned revenue for services paid for by customers but not yet provided.
Equity:
Issued capital and reserves attributable to equity holders of the parent company (controlling interest ).
Non-controlling interest in equity.
Regarding the items in equity section, the following disclosures are required:
Numbers of shares authorized, issued and fully paid, and issued but not fully paid.
Par value of shares.
Reconciliation of shares outstanding at the beginning and the end of the period /
Description of rights, preferences, and restrictions of shares.
Treasury shares, including shares held by subsidiaries and associates.
Shares reserved for issuance under options and contracts.
A description of the nature and purpose of each reserve within owners equity
