Week 8 June 1 – Accounting Statements and Cash Flow The topic that I have learnt today is on accounting statements and cash flow. The statement of cash flows contains the operating, investing and financing which are primary in business activity. Inflow is when the money are received and not necessarily earned. Whereas, outflow is when the cash is paid and not necessarily incurred. The information you get from the cash flow statement can help evaluate the company’s ability to meet its obligations.
Business owners always seek for saving costs in a ways that promise with the efficiency of the work. Costs could be represented in different forms, e.g. : money, time, labor and so on. It was realized to us that the most effective metrics that give a good insight about critical functions are Quick Ratio, Budget deviation, Service Level Management and Reporting time. Quick ratio metric specialized in measuring how the organization can cope with financial requirements specially the short- term ones.
(Banerjee, 2015) Their results materialize the efficient management of the company, that is, how management has used the resources, provide more complete answers about what is being managed as effectively the company. For these reasons, management should ensure that the behavior of these indices, because while greater your results, the greater the prosperity for it. e) Evaluation of outstanding debt of Bayou Clinic Outstanding debt of Bayou clinic can be assessed through debt ratios. The debt ratio measures the intensity of all the debt of the company in relation to its funding, measures the percentage of total funds provided by creditors. However, Candy must analyze the interest coverage ratio and other ratios.
Financial management helps to determine the financial requirements of the organization and leads to take financial planning to the organization. • Accomplishment of funds Financial management involves the accomplishment of required fund to the business organization. Accomplishing needed funds play a major part of the financial management in an organization which involve possible source of finance at minimum cost. • Proper Use of Funds Financial management systems help to proper use and allocation of funds which leads to improve the operational activity of the business organization. If the funds use properly, so it helps to reduce the cost of capital and maximizing the value of the firm.
The direct form of circulation of commodities is C-M-C, the transformation of commodities into money and the re-conversion of money into commodities, selling in order to buy but alongside this form, which is quite distinct from the first: M-C-M, the transformation of money into other commodities, and the reconversion of commodities into money, buying in order to sell. Marx is asserting that money is being transformed into capitol. Also Marx asserts that money is required in capital because people use money to purchase a commodity. Without money, people would have to turn to the other form of production. At the end of Chapter 4: The General Form of Capitol, Marx asserts that M-C-M’ is the major formula for capitol.
Among these tools is financial ratio analysis used for comparative purposes. Aside from it, the annual financial statements can be analyzed using horizontal analysis which highlights the trend of various figures from revenue to expenses and cash flow over the reporting periods. Vertical analysis emphasizes the relative size of each item as a composition of a set of numbers such as operating expenses as a proportion of total sales revenue. When dealing with financial forecasts and business plans, historical analysis is irrelevant. Rather a forward outlook would be more appropriate.
The effectiveness of business comes with the consistency of progress along with all different factors. The aspects of budget variance are also discussed. However, while considering the different non-financial factors; environmental and competitive analysis is also being done in the paper in order to complete form of analysis. It is rightly said that customer satisfaction is assumed as the main factor to which easyJet becomes successful for company that always brings changes, which is based on customers in order to offer the low cost
Generally, cash flow statements are divided into three main parts for reviewing the cash flow from of this three types of activities: (1) operating activities (CFO); analyzes a company’s cash flow from net income or losses. (2) investing activities (CFI); shows the cash flow from all investing activities. (3) financing activities (CFF); shows the cash flow from all financing activities. Although I discuss each financial statement separately, they are all related because any changes in assets and liabilities that on the balance sheet are also reflected in the revenues and expenses that on the income statement, which result in the company’s profits or losses. Cash flows provide more information about cash assets listed on a balance sheet and are related to net income on the income statement but not exactly the same, And so on.
In order to have a tighter control on financial, IBC must ensure that all records are kept under proper control and cannot be misapplied, whether on purpose or by mistake. Ensure that all expenditures incurred are properly authorised and accounted for. Another way that IBC can use to have tighter control on financial, is to use a mechanised accounting system. It is great time saving for business. With a reliable system, it can eliminate the risk of errors by entering the double entry twice and are posted to the accounts immediately.