Discussion: Cash Flow and Financial Analysis (Turnitin is active. Read instructions) 500 Words
Important: Turnitin is active. Turnitin score greater than 25% will be investigated. In addition, you may lose points if your Turnitin score is greater than 25%.
Discussion 2: Cash Flow and Financial Analysis
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. 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.
Instructions:
Read and respond to your classmates. Respond to at least 3 of your classmates’ posts
In your response to your classmates, 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 your classmates’ 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.
Reply to class mate1:
Part-1
Cash enables a business to meet its financial obligations for example payment for stocks, payment for taxes, labor payments, and many more. Cash generation is a strong indicator of the overall financial performance of a business. For example positive cash flow indicates that a business is thriving while a negative cash flow shows that a business is not performing well and may experience difficulties in running affairs. Cash generation also forms the basis of profit or loss. The difference is that in a cash flow statement, we get to record all day-to-day cash that is received or spent while in a Profit and Loss Statement, only the totals are recorded after a given accounting period. Daily monitoring of cash flow statements. Companies usually monitor the cash flows regularly in order to avoid irregularities or omissions. Cutting on costs. They do this by minimizing expenditure costs in order to maximize profits. Asking for partial payments or deposits for orders that have been gotten.
Part-2
Financial analysis helps in assessing the current financial position and operational efficiency. For example, The Statement of The Financial Position is a good report of the financial position of a business. Financial analysis is used to compare past performances and present performance to understand how the business grows. For example, the Profit and Loss Statements show that profitability can be used to know whether the business is performing well or not. This is to ensure that the business is not spending its own cash reserves to fund impending orders and enables it to stay afloat. Sometimes a business may delay payments to vendors until the stocks are nearly finished to ensure that there are no costs associated with dead stocks
Reply to Classmate 2:
CASH FLOW
In the business, money plays an important role whether it is a small scale business or large scale business where the cash is coming from the customer who purchases the product or uses the services of the company. (Murray, 2020) .This type of cash flow is called inflow because the company is getting money from the customer and the business has to pay the cash for the rent, utilities, monthly loan payments, office maintenance, transport, and employee salaries which are called outflow. Cash flow is very important to the business and the cash flow is negative then there would be a huge impact on the company and it takes many weeks or months to recover from the debt. Payments to the vendors have to be paid regularly and also the salaries to the employees have to be paid monthly.
If the company is new and starting the business then it would be very difficult with cash flow dealing because there will be many expenses where the money is going out and it takes more time to get the money back. Whenever the service is provided to the client, the first thing the company has to do is to invoice the services provided to the customer because the clients do not until the company invoices. So, the invoices have to be ready and sent to the customer as soon the services are offered or in some cases, the products have to be shipped to the client. Another important thing where the company has to focus on spending and it should be controlled across the organization
Financial Analysis
It is used to analyze the financial statements of the company by evaluating the business, budgets, and other financial related details which helps to determine the financial position of the company. If any company has the interest to invest money in some other company then the organization may check the financial statements of the company which is conducted by professionals who know the financial sector. (Masson, 2018). If the financial analysis is conducted internally then it would help the managers to make better decisions and also the financial analysis may help the investors to review the historical data of the company’s success and the company may choose the best investments based on the financial statements.
The fundamental analysis and the technical analysis are the two main outcomes of the financial analysis where the fundamental analysis financial data of the statements and ratios to obtain the value of the security and the technical analysis assumes the security value based on previous data and determine the price of the product. The financial policy and the economic trends evaluation, identifying the companies or projects to invest and also the long term business plan can be easily built by the financial analysis and the past data is required to analyze the financials of the company. The company has to look out for cheaper utility provider who provides the same type of services who are trying to grab the market which would help the company to save a large amount of money.
Reply to Classmate 3:
Part 1: Importance of Cash
Labour income is the money that is generated in the usual work procedures of a business. Every day, it has the ability to create positive streams that my organization can reliably have. In particular, income can show the true benefits of my organization. It is one of the great proportions of money sources and labour supply.
Non-profit joints are a budget statement for a certain period of time that gives an organization income, costs, and benefits. The P & L proclamation demonstrates the ability to perform business, care and benefit costs of the organization. The organization that generates the money shows the amount of money invested and consumed the money. It has three sections to finance income, subsidies and money. (Mulier, 2016)
For example, a partnership can be used to control money flotation, including the next year to prepare the flow of money, in order to know the possible risks, to improve charging improvement and payment. These are the best way to control money from collaborations (Mulier, 2016).
Part-2
Why financial analysis is important
Financial Analysis will determine the process of understanding the risks and the process of understanding the winner, analyzing the available financial information. You can also set accounting ratios among many of the elements in the balance sheet. Financial situations are used to determine the economic situation of ordinary businesses. Internal and external users typically focus on financial statements to understand the overall economic situation of the company. According to the example given, XYZ Company, the company’s assets totalled 1,275 million Euros; Total, fifty and fifty thousand scientists. The data provided shows that the current company is four hundred and twenty-five thousand. Internal users of XYZ managers also use balance to plan, evaluate and control operations(Kim, 2017).
Using the appropriate analysis methods, XYZ can analyze the probability of a profit or loss. This study has two important steps, formulating the available financial situation and adjusting them accordingly. Then, calculations of financial statements are carried out. Actually, none of these steps is done. (Kim, 2017)
