This week we learned that companies are required to prepare a statement of cash flows because it gives a more accurate snapshot of the actual cash flow of a company. Financial statements give an overall picture of how much revenue a company is reporting, but high revenue does not guarantee that the company has the ability to pay its bills. The statement of cash flows is a tool designed to help external users make sound economic decisions about the company. The statement of cash flows is divided into three sections: 1) operating activities, 2) investing activities, and financing activities. The operating activities section analyzes the company's flow of cash as it relates to a net loss or net income.
2) The sales budget calculates how much the company will spend to produce the required number of units. The president should do further consideration in terms of capital and labor costs. Does company have an adequate capital to produce the required number of units? And if the answer is no, they should look for other alternatives such as borrowing and others. 3) The sales budget is to estimate the profitability.
Being able to track sales compared to the previous years’ numbers is a valuable tool in being able to track business. They use this information to forecast on where they think the business will be heading in the next week, month, or year. If the debt percent gets to high then they need to adjust the amount of liabilities that they have to bring that number down. Knowing the times interest earned ratio allows the managers to know at what percent the company is earning interest on its net income. Investors find this information lucrative because the more expendable cash a company has the more likely they are to pay out in dividends for the stock holders..
supplies expense. cost of goods sold. : 2 5 of 5 Question 6. Question : (TCO 4) Notes payable: is a current liability account. usually has a debit balance.
f. Free cash flows represent the cash that a company is able to produce after laying out the money required to maintain or grow its asset base. g. Weighted average cost of capital is the average return required by all of the firm’s investors. h. Free cash flows and weighted average cost of capital interact to determine a firms value by looking at the amount of cash needed to grow and amount needed to be paid out by investors.
Comparative Ratio Analysis of Tootsie Roll Industries and Hershey Comapny A company’s general financial picture can be determined through a ratio analysis. Financial ratios have proved to be a useful tool for management, investors and creditors. Management uses financial ratios to develop ways to improve operating efficiency strategies for future growth and see how they stack up against the competition in their industry. Creditors and investors analyze ratios to determine a company’s financial strength and operating effectiveness in order to loan money or invest in them. Financial ratios have more impact when compared over several years to help identify trends.
Study the demand elasticity for its products and discuss the availability of close substitutes for its products. How does that affect pricing decisions? Analyze the company’s profitability. Identify the economy or industry influences on its costs, operations, and profitability. Describe the competitive environment in which the firm operates, the distribution of market power, and the strategic behavior of the firm and its competitors.
Stock market can either make me more money or lose more money. It all depends on the risk I have and the business knowledge I have for a certain stock. The stock market is a test for me in knowing what stocks to buy or sell at a right time. I appreciate in a nice way of how the stock market procedures work, and looking at the yearly or monthly basis of their graphs. Furthermore, the stock market is one of the best ways to test the knowledge of using business
Businesses in need of funds can easily discover which financial institutions or which financial markets may provide funding and what the cost will be for the borrower. This allows the businesses to compare the cost of financing to their expected return on investment, thus making the investment choice that best suits their needs 3) Ways the US financial Market impact the individual: Individual are the participant or investor of the financial Market. Individual need is to get best return on their investment for minimum cost. To borrow money from the financial market individual have to make his mind for the risk issues but efficient financial markets facilitate lower search and transactions cost to the individuals as market provide them a list of financial products with varying risk and pricing structures as well as maturity. Individuals in need of funds can easily discover which financial institutions or which financial markets may provide funding and what the cost will be for the borrower.
What are the key assumptions that especially influence WACC? 5. What are the free cash flows of the packaging machine investment? Should Koh approve the investment? Management Summary Financial Health The financial health or strength of a company is measured by its ability to service its financial obligations senior to the common shareholders.