Owners put in their money to make a profit this is why it is important for them to track the sum of money they may have made in an accounting period. Usually a supervisor’s standing is related with the success of the company. When a business is making money the amount of money a manager makes will usually increase and they may also get a promotion. Income statements are also used to check the revenues and expenses of the company which allows managers to reduce their unnecessary expenses to make more profit. These income statements are also useful for outside users such as investors, creditors and the government.
Cash transactions from op, fin and inv o Were any stock options exercised? In which financial statement did you find this information? What are the components of this financial statement? Using the Statement of Cash Flow we can see that proceeds from the exercise of stock options totaled $1,826,816. The components of the statement of cash flow shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down into operating, investing, and financing activities.
The reason organisation needs to control their costs properly would be that it would end up saving money on expenses and increase its revenue. This will help the company to increase its revenues and this would allow the company to invest more money if required. For example, the business should control its costs so that it saves money and by having the right amount of stock the business can then have the full benefits of selling those stocks and receiving cash which could be used for other areas of the business. In a business organisation, a budget represents an estimate of future costs and
The balance sheet connects to income statements, in turn also connected to cash flow statement. Occurrences or a change to the net cash activities of the cash flow statement affects the balance sheet. The balance sheet is useful when estimating the potential of the organization in order for them to achieve there long-term mission. However, cash flow statement displays the exchange of currency among an organization and external agents. For example, the cash flow can be affected when the company purchases products, and if the costs of the products are an outstanding amount in turn it will affect the assets on the balance sheet.
If a business is operating correctly then it should generate cash surplus. The faster this company expands the more cash it will need for working capital. There are two elements in the business cycle that absorb cash. Receivables and inventory. One specific method of increasing working capital is related to improving internal controls such as optimizing the systems used for maintaining accounts receivables.
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..
A portfolio analysis help a company with making decisions on what products that they must considered to be the main focused and which one they should get rid of. The portfolio analysis raises the issue of cash flow availability for use in expansion and growth for products in the organization. The BCG Matrix and the portfolio analysis would benefit a company to see where they stand with their products and where they should put more focus on to bring that particular product up in the market. Even though there are products that are doing well for the organization they can also become problems. The economy is going through some tough times now and it could be hard to keep the stars the stars and the cash cow the cash cows (Portfolio Analysis,
The statement of cash flows tells how a company gained cash and how they spent the cash over a specific time frame. The statement of cash flow is useful internally and externally for the same reason. The individuals who are interested in the statement of cash flows are because they want to know what the company has done with their cash. According to text the three important questions asked that the statement of cash flow answers are where did the cash from the period come from? How was the cash used?
The pro forma statements are commonly used when applying for a business loan. Typically, the investor will require a business owner to submit a pro forma statement with the loan application. Company’s carrying inventory must have a pro forma statement that would show the impact of the amount borrowed on the current assets and will also show the liabilities on the current balance sheets. This provides management with realistic numbers of the amount of cash required by the company. There are a wide variety of ways one can benefit from the pro forma
1) What are the three sections of a Cash Budget, and what is included in each section? The three sections of a Cash Budget are; Cash receipts, Cash disbursements, and Financing. A cash budget allows you to estimate and track all of the money that comes into and leaves your business. Cash Receipts are any monies your business takes in, such as sales receipts. Cash disbursements show where you must spend some of your money, such as on employee pay, raw materials purchases, and manufacturing overhead costs Financing shows expected payments and the repayments of the borrowed funds plus interest.