Cash Flow Essays (Examples)

Cash Flow Statements Over the

863 billion, then decreased it in 2007 by $603 million. Last year, with the stronger flows from operations and decreased stock retirement, they increased their cash position by $4.288 billion.

As with Microsoft, Sony has seen a strong increase in cash flows from operations over the past three years. They have increased 89.4% from ¥399 billion to ¥757 billion. This improvement is only partly attributable to top line improvement, as Sony's starting line hardly improved at all in 2007. Instead, that year saw a significant shift in the change in working capital. With regards to investing activities, Sony has not increased its capital expenditures over this time period. Also unlike Microsoft, Sony has seen significant capital outflows in all three years from its investments. They have enjoyed inflows from other activities, but not enough to offset the increasing losses. Sony has consistently been able to increase its cash flows from financing activities. 2008, however, saw a strong spike in cash flows from financing activities, from ¥172 billion to ¥510 billion. Overall, the strength of Sony's improvement in cash flows from operations, in particular with respect to its starting line, has resulted in a steady increase in cash flows over the…… [Read More]

Cash Flow Cost of Capital Financial Performance and Options

Cash Flow

The different authors use a number of quantitative approaches to understanding firm performance. Paunovic (2013) discusses the pricing and valuation of swaps. The author seeks to "demystify the structure of these financial derivatives (swaps) by presenting their valuation methods and by showing how they are used in practice." Thus, the author is presenting textbook explanations of swaps to her audience. Swaps are priced at par at the present time. The counterparties are swapping fixed rate obligations for floating rate, and make differential payments. Neither party would enter into the agreement at an unfavorable rate, but over time the changes in interest rates will mean that one party or the other will pay more. The floating rate is often based on LIBOR, or other common floating rate. Since banks are almost always intermediaries in swaps, they might seek to take a spread on the rate. Thus, a company setting up a swap agreement is likely paying fair value on the day for the swap, plus the bank's spread. The company might choose to do this because it needs to exchange its floating rate obligation for a fixed rate, or vice versa. This is usually based on operational or financial…… [Read More]

Cash Flow and Its Analysis

Cash Flow Analysis

Discuss Cash Flow And Its Analysis

Financial Leverage

Financial leverage refers to the use of a company's assets and liabilities targeting to earn profits upon balancing the risks associated. Financial leverage follows the argument in physics of lever where little force is used to lift heavy objects. Financial leverage uses debts and stock (Preferred stock) to increase earning. Leverage is a significant measure that financial institutions use to increase benefits though it comes with risks.

Benefits and risks of financial leverage

Use of financial leverage increases the earning and thus, higher profits for a financial institution. In cases where a company successfully uses leverage their credit rating increases since it a demonstration of how well they can tackle risks related to debt. Other benefits include efficiencies in scale of operations and higher cash flows.

Use of financial leverage puts an institution in risk of insufficient operation income. The leverage incurred is always a liability so is the small amount used to acquire the leverage. The institution runs the risk of inability to meet its short-term obligation to customers and shareholders. This likely to be the case in times of low economic performance that implies lower turnovers. It…… [Read More]

Cash Flow Sprague 2008 A

A second challenge organizations face with cash flow management is being realistic with the amount of time it will take for them to receive revenues. This negatively affects cash flow projections that Sprague illustrates as being very important to a company's success. Companies are become slower and slower to pay their vendors, with 45 to 60 days becoming more the norm than the traditional 30 days, according to Feldman, as cited by Spargue. The third and final challenge to cash flow management is the lag in time between when payment to suppliers and employees comes due and the time in which revenues are received from customers.

Summary:

Sprague (2008) gives a fairly comprehensive overview of cash flow, with this article. The author begins with the history of cash flow reporting and the cash flow statement. Sprague describes how cash flow reporting has transformed from being an option that had begun to catch on as effective in the 1960s to today's now mandatory requirement, as issued in FASB No. 95, stating that cash flow statements must be included with the income statement and balance sheet, in an organization's annual report to shareholders. FASB No. 95 is covered briefly, with a discussion…… [Read More]

Walgreens' Cash Flow Using Its 2011 Annual

Walgreens' cash flow using its 2011 annual report. Currently ranked as the largest drugstore chain in the U.S., Walgreens had its beginnings in 1901 when Charles R. Walgreen bought the Chicago drugstore where he worked as a pharmacist. Over the next two decades, Walgreen bought 20 additional stores, adding such features as soda fountains with luncheon service, as well as his own line of drug products. The company added its first photofinishing studio in 1919 and introduced the malted milkshake at its fountain counters in 1922. By 1925, Walgreens had 65 stores with total annual revenue of $1.2 million. Walgreens' sales passed the $1 billion mark in 1975, and the company continued its growth and innovation to its current position of leadership in the retail pharmacy industry (Funding Universe, n.d.). With record profits of $2.7 billion in fiscal year 2011, Walgreens filled 819 million prescriptions, a figure that equates to one in five retail prescriptions in the U.S. The company is headquartered in Deerfield, IL and has over 247,000 employees (Walgreens, 2011).

Analysis of Cash Flow Statements

Analyzing Walgreens' cash flow statement provides indications of the company's performance in 2011. Net earnings increased by $623 million over 2010, continuing a…… [Read More]

Accounting Income and Cash Flow Which Do

accounting income and cash flow? Which do we need to use when making decisions by using NPV? Explain in short.

Accounting income takes in consideration total profits; which is usually some form of total revenues minus total expenses. Cash flow is a totally different concept because it doesn't necessarily account for total income, rather it just accounts for cash out flows and in flows. For example, it may not account for various administrative costs or wages that are paid to employees and it may not account for the total income of the organization but just for one specific project.

A positive NPV is a good start -- now we need to take a closer look

Forecasting risk: How sensitive is our NPV to changes in the cash flow estimates; the more sensitive, the greater the forecasting risk (explain which conditions we accept the risk for both investors and company point view).

Investors generally make decisions about risk based on their own personal situation. For example, an investor close to retirement may be risk adverse while a younger investor may be more receptive to risk. The company's will also have a unique risk profile based on their current circumstances. However, both…… [Read More]

Reverted to Cash Flow Rather

Based on a large sample of firms from different countries after adopting IASB cash flow accounting, firms evidenced "less earnings management, more timely loss recognition and more value relevance of accounting data" than firms without IASB standards (Morais & Curto 2008). The drive towards greater homogenization of international standards has lead the United States FASB (Financial Accounting Standards Board) to consider the IASB's call for a shift to cash flow methods for all organizations. The justification for this is that accruals are more subject to dishonest practices "since every accrual requires certain assumptions and estimates… when a firm completes a sale on credit, it must estimate the likelihood that the cash will be received, when the receipt will take place, and if full payment is uncertain, how much should be reflected on the income statement. None of these issues arise when the sale is for cash" and a firm cannot use assumptions and estimates to inflate profits ("Will global accounting rules help or hinder accuracy," Knowledge @ Emory, 2007).

However, cash flow accounting is not without its critics. Because "accrual account recognizes revenue and expenses in the period they occur, regardless of whether cash changes hands" it may be a…… [Read More]

Cashflows the Cash Flow Statement Is a

Cashflows

The cash flow statement is a critical tool for financial planners and analysts interested in assessing the health and wellness of a company from a financial and operational perspective. The statement of cash flows provides information about the cash payments received by a company during a defined period; the amount that should be received from cash receipts is also reported (Kieso, Weygandt, & Warfield, 2007). This is critical information a company needs to determine how well their products and services are doing. The cash flow information assesses whether products and services are bringing in revenues for the company. Cash flow does not includes revenues coming in as interest or credit however, for the month the receipt is issued say for the charge incurred, or when the loan is given. There is a system of checks and balances. The system in place is highly organized to capture a big picture sense of how well a company is doing. Cash flows generally reflect an upward trend in cash flows, provided a company does well as one expects; many business however, take some times before they realize a positive cash flow. This is normal.

Other information a company can gather from cash…… [Read More]

Accounting the Cash Flow Statement

, 2009). Similar adjustments are made for items, such as expenses, taxes etc. (Stickney et al., 2009).

The second section shows the cash inflows and outflows from investing. The figures shown are the changes that have occurred on the previous year. For example, if the firm makes a capital investment, the cost of that investment will be an outflow. If there is revenue created by an investment, such as the sale of the asset, this will be a cash inflow (Stickney et al., 2009).

The third section is the financing. The main components are the changes in debt; increased debt creates a cash inflow, whereas paying off debt creates an outflow. Any capital that comes into the firm or leaves the firm is included in this section. If dividends are paid, they will be a cash outflow in the financing section. The cash flow statement will end with a net total of the cash flow from all areas and a calculation of the difference between the current and the previous period.

By understanding what the cash flow statement shows and why it is created the importance may be appreciated. The statement shows important information that is valuable to a range…… [Read More]

Budgeting According to Cash Flow

After considering the material provided by both the FSO Technologies
and Bank of America tutorials, it becomes increasingly clear that the key
to long term financial viability is projection and planning. In the case
of the childcare center, the tutorial advised that once one has clearly
mapped out a cash budget which compares expected cash inflows and outflows,
one can begin to make meaningful incremental and longterm changes in
spending and pricing. As the childcare center director, I would be in a
unique position of insight to administrate a consideration of all the
utilities, employees, facilities, marketing and petty expenses which
constitute our overall budget. This would also allow me to detect places
where expenses can be reduced or where more is needed.
By combining this with a projection of future cash needs, I would be
in a position to assess the true nature of our overall cash flow situation.
This would allow me to make management decisions according to a lucid and
empirical understanding of what is feasible and what is not.

3. Critically analyze how the cash flow tutorial and record keeping
forms that you completed can benefit a center director.
The tutorials on cash flow and record…… [Read More]

Free Cash Flow in Order to Make

Free Cash Flow

In order to make a capital budgeting decision, the company must identify the incremental free cash flows associated with the project, particular for long-term projects that require the cash flows to be treated to account for the time value of money (NetMBA, 2010). A free cash flow is defined as "the cash that a company is able to generate after…" the initial expenditure (Investopedia, 2012). The first step is to eliminate the obvious non-incremental flows such as pre-existing overhead, sunk costs and non-cash flows like depreciation.

Within these issues, the process is not always simple. For example, many managers find overhead determinations to be difficult. The underlying principle is that the overhead the manager needs to take into account is the overhead that is incremental to the project, for example if new support staff are added. Diversion is an area that is tricky, however. Resources diverted from other areas of the company can be difficult to treat (Keown, 2012). For example, it is clear that the cost component of such flows is not incremental, because that money would be spent elsewhere anyway. However, the revenues might be different between the two uses of the resources. So to…… [Read More]

Walgreens Liquidity and Cash Flow the Management's

Walgreens Liquidity and Cash Flow

The Management's Discussion and Analysis, together with the Consolidated Statement of Cash Flows and Notes, provide insight into the company's sources and uses of cash.

Over the two-year period for the years ending August 31, 2009 thru 2011, the company has seen large cash outflows which affected its cash position and its liquidity. Net cash provided by operations declined from $4.1 billion in 2009 to $3.6 billion in 2011. Cash provided by operations was the principal source of funds for the Duane Read acquisition, for expansion, remodeling programs, shareholder dividends and stock repurchases (Walgreens, 2011).

Walgreens management attributes the decrease in net cash provided by operations to higher working capital. In part the cash flow decrease in working capital was offset by higher earnings, which increased by $708 million over the two-year period (Walgreens, 2011).

Walgreens' cash and cash equivalents have trended down from $2.1 billion in 2009 to $1.9 billion in 2010 to $1.6 billion in 2011 for a total decrease of $531 million. Included in the company's cash and cash equivalents is cash on hand and all highly liquid investments having an original maturity of three months or less (Walgreens, 2011).

Cash provided…… [Read More]

Equity Cash Flow and Notes Analysis

Equity, Cash Flow, And Notes Analysis for the General Electric Company

Regarding the specific components of the Statement of Changes in Owner's Equity and Statements of Cash Flows, from line items to balances

General Electric still stands tall in the public's estimation and in its international reputation as a pioneer of Six Sigma management policies regarding internal quality control. (Six Sigma, 2004) According to its annual report, GE Share owners' equity increased $8.9 billion, $4.3 billion and $7.9 billion in 2002, 2001 and 2000. Thus, the performance of the General Electric company in sheer dollar terms continues to improve, not simply as a statistical blip between the current financial year and the financial year of the past, but steadily, and over time. The increases were largely attributable to net earnings of $14.1 billion, $13.7 billion and $12.7 billion. These increases were only partially offset by dividends declared of $7.3 billion, $6.6 billion and $5.6 billion in 2002, 2001 and 2000, respectively.

But by and large, GE's profit as a company thus overall increased in terms of its net worth, and also in terms of its ability to pay dividends to its stockholders and shareholders. It was also able to maintain…… [Read More]

Proforma Cash Flow Balance

Each ***** will whelp an average of 5 pups per year and that the sale of these pups will average $4,000 each. Breeding stock imported from Europe typically averages $10,000 U.S. per dog after import expenses and other costs.

These assumptions based on the experience and past knowledge of the staff as well as industry averages. It is felt that they represent realistic estimates. It is difficult to predict certain aspects of the financial data, such as the number of small dogs that will need grooming vs. some of the large dogs that will come in. Conservative estimates give room for error. This was the method chosen for the estimation of proforma statements.

Initial capital will come from $50,000 total form the partners. A small business loan of $495,000.00 will be used to finance the remainder of capital start up costs, plus one year's operating expenses. The term of the loan will be 10 years at an annual rate of 4.5%.

Pro-Forma Balance Sheet

ASSETS

Current Assets

Cash

Net accounts receivable

Inventory

Temporary investment

Prepaid expenses

Total Current Assets $316,691 $402,262 $424,276

Fixed Assets

Long-term investments

Land

Buildings (net of depreciation)

Plant & equipment (net)

Furniture & fixtures (net)

Total…… [Read More]

Net Cash Income How Does Net Cash Flow

Net Cash/Income

How does net cash flow differ from net income and why is that difference relevant to financial decision making?

Net cash flow takes in consideration the changes in short-term assets of an organization. Whenever a cash receipt is made then net cash flow is raised or when a bill or expense is paid then the net cash flow decreases. It is basically a measure of how much cash, or cash equivalents, that the organization has at any given time. Net cash flow can also be forecasted so that the organization can have an idea of how much cash it will hold, or need to hold, in the future.

Net cash flow, although it is indirectly related, is not necessarily directly related to any measure of profitability. For example, if a company receives a check for a hundred thousand dollars then it would increase net cash flow; even if the receipt was for a project in which they were losing money on. Therefore you can have a positive net cash flow but still have…… [Read More]

AIS Cash Flow

Accounting

The role of the firm in the economy is to maximize shareholder wealth (Friedman 1970), owing to the agency role that managers play, where they safeguard the wealth of the investors. Given this reality, managers are obligate to seek out ways to increase the profits of their companies. There are as many ways to earn profits as there are companies, but this paper is going to focus on a particular approach, which is cash management. For a business, cash is the ultimate goal, as the fungible store of wealth that the shareholders seek. Yet for the business, cash is also a source of inefficiency. Unused cash on the balance sheet earns nothing, and cash sitting in short-term investments is unlikely to have a positive real return either. Apple shareholders recently demanded that the company return some of its excess cash to the shareholders as dividends, because of how inefficient excess cash is for a company (Popelka 2013).

Thus, the manager is responsible for striking the right balance between spending money to earn returns, and returning that wealth to the shareholder. The company must acquire cash and then quickly use that cash to either generate more, via retaining the earnings…… [Read More]

Net Cash Flow for the

The IRR is also known as yield method, and IRR of a project is the rate of discount at which the present value of cash flow is equal to the present value of cash inflow. While IRR base the value on rate of return, the ARR ignores the time value of money and it is not accounting based of return. Under ARR, depreciation is calculated in different methods such as accelerate or straight line, and the technique ignores the salvage value of the initial investment.

5. "Explain the relative significance of the unadjusted payback period in this decision situation."

Payback period assists in determining payback period in the life cycle of the project. Typically, it would be more than 8 years before NPV would become negative. However, the payback may not be useful in determining acceptance of a project because it ignores cash flow and does not consider time value for money after the payback in the life of a project.

Payback period is the time duration that is required to recoup the initial costs that has been committed in a project. The pay back period is the number of years that it will take cash flows from project to…… [Read More]

Investors Prefer Cash Flow Over Earning but

Investors prefer cash flow over earning but the article points out that there are many shortfall is in using standard cash flow measures. There are various definitions of cash flow, some quite incoherent. GAAP does not help either since the whole subject of cash flow itself is so vast, varies from country to country, and possesses complexities and unpredictability that even GAAP with its laws and definitions has just left us with more confusion, inconsistency, and miscategorization.

In response to this complexity of cash flows, many investors resort to EBITDA (earnings before interest, taxes, depreciation, and amortization) and cash earnings (typically defined as net income plus depreciation and amortization). These existed before the GAAP measures, but they have their own major shortcomings.

The question then is: what is the best measure of free cash flow? And the way to answer this is to ask how free cash flow metric will be used.

The article distinguished between four possible uses of cash flow metrics and focuses on the two most popular uses of cash flow in valuations:

a. As the main variable in DCF models

b. In price-to-free cash flow (P/FCF) multiples.

The article focuses on cash flows in multiples-based valuations…… [Read More]

Dell's Waning Cash Flow Signs of Concern

Dell's Waning Cash Flow, Signs of Concern" attempts to elucidate the reasons behind the purported deal of Dell -- a computer company -- to go private after existing for years as a company with publicly traded stock. As such, the author explores a number of scenarios that may have influenced Dell founder Michael S. Dell's decision to go private. He discusses both the benefits and the negatives associated with a private company, and attempts to offer the reader insight into the financial prowess -- or lack thereof -- of this particular organization.

The premise that the article is based on is that Dell and Silver Lake (an investment firm) are considering a $24 billion deal to go private due to inefficient marketplace performance and declining interest in stock investors. However, one of the chief tenets that Eavis contends that is spurring this deal is the fact that Dell allegedly has a shrinking cash flow. The author states that during the most recent fiscal year, the company's free cash flow was 2 billion dollars less than it was during the previous fiscal year. He simultaneously alludes to the fact that Dell is fortunate to have closed out the current fiscal year…… [Read More]

Insolvency Law Cash Flow and Balance Sheet

Insolvency Law

Cash flow and balance sheet tests

The cash flow test very simply put is the ability of a company to pay off their debts as they are liable to pay them; i.e. As soon as they are indebted they already have generated the money to pay it off immediately. A company will prove to be insolvent if and when the futuristic calculations prove it to be incapable of paying their debts. In case, a company is able to pay off their debts or bills for the first two months and after those, it is still considered insolvent. Hence, the cash flow insolvency test will be a futuristic calculation of debts and cash inflows based on the current trends of both e.g. If a company is earning $100,000 and has debts of $50,000 going out every month, the debts will increase to $60,000 in a month's time making the company insolvent (Arner et al., 2006).

The balance sheet test is somewhat similar to the cash flow test but instead of calculating futuristic cash inflows, it focuses on probabilities of increase or decrease in liabilities and cash flows. Hence, the entire balance sheet test is based on the perspective inflows…… [Read More]

Cash Flow Forecasts Our Company

This enables the company to better match its inflows and outflows. However, this also means that much of what constitutes earnings is not a direct, immediate cash flow. There are a number of items that will appear on an income statement that are either flows that have already occurred, or are flows that have not yet occurred. However, because the transaction was based in that quarter or year, it appears on the income statement. Earnings, therefore, are intended to reflect the firm's economic activity for the period, not its cash flows.

Cash flow forecasts outline what the firm will have left over after it collects all of its money for the period and pays out all of its expenses (Forsythe, 2006). Because this measures the firm's economic activity, it can be used as an alternative to earnings in evaluating a firm's performance for the period. A cash flow forecast, by contrast, allows management to understand how much cash it will need to operate in the quarter and compare this figure directly with the amount of cash it is expected to receive from all sources. Financing cash flows, for example, are an important element of a cash flow forecast that is…… [Read More]

Cash Flow Statement for the

Each section of the cash flow statement tells a different part of the firm's story. For example, it may be understood by management that significant amounts of their profits went into new buildings and equipment. What the cash flow statement does is isolates that information. Management and shareholders alike can extrapolate that data from the balance sheet, noting changes in fixed assets, but the presentation of the cash flow statement provides a clean, easy-to-understand summary of those transactions.

The same situation occurs with regards to financing activities. These can have a dramatic impact on the firm's cash position. The firm's bank account may look much healthier after a year in which stock was issued, but the cash flow statement allows management and investors to understand the role that stock issue played in the improved bank balance.

This is critical to understanding whether the firm is improving its cash position through strong operations or through the issuance of debt or equity.

By isolating this information, we can see some of the ways in which cash flow statements can prove useful, alongside the profit and loss report. The P&L report is necessary, because it is constructed in accordance with accounting principles on…… [Read More]

Rule-Of-Thumb in Evaluating the Cash Flows of

rule-of-thumb in evaluating the cash flows of an organization is: The cash flows from operations should be positive, and increasing each year and ideally should be sufficient to cover any negative cash flows from investing activities.

How would you evaluate China Trade in terms of cash flows, in light of this rule-of-thumb measure?

The cash flow statements have Direct and Indirect methods of cash flow.

The Direct method reports the cash receipts and cash disbursements and deducts the latter from the former stating difference.

The Indirect method uses net-income as a starting point making adjustment for non-cash based and cash-based transactions.

Both methods here on their balance sheet show a $3,000 loss in operation activities. The rule of thumb heuristic is that cash flow from operation should be positive, increasing each year and ideally there should be sufficient cash flows s to cover any negative cash flows from investing activities.

China Trade shows no historical reports, therefore, these cash flows may well be decreasing (although this is only an assumption). Given this present records, there certainly seems to be insufficient money to cover any negative cash flows from investing activities. It is certainly not positive and this bodes…… [Read More]

Using Future Cash Flows in a Financial Analysis

investment in a rental/real estate property. There is a one-time purchase of $10,000 in land that can subsequently be rented for a yearly $3,500 rent for a period of several years. At the end of the rental period, the investor aims to sell the land for a certain price. The longer the period of the rental is, in number of years, the more the land will degrade and, as a consequence, will be valued at a lower sum at the end of the entire period of time.

As a consequence, the several scenarios that will be taken into consideration will look at a comparison between longer years of rental vs. lower price for the final sale of the land or a shorter period for the rental period, but a higher price for the final sale at the end of the rental period.

This paper will look at three different scenarios that will be analyzed according to criteria such as the net present value (looking at present worth and future worth and discounting future worth in order to obtain present worth), the internal rate of return (IRR) and other methods that include the cost effectiveness and benefit-cost instruments. The conclusion should…… [Read More]

DCF Analysis Discounted Cash Flow at Bristol

DCF Analysis

Discounted Cash Flow at Bristol Myers Squibb

In order to achieve a discounted cash flow analysis for equity in Bristol Myers Squibb, the change in equity values from year to year must first be predicted. This was accomplished through a brief analysis of equity levels at the company during a five-year period of observation (2007 to 2011), during which the company had an average (mean) equity growth amount from year-to-year of $1,326.26 (in millions) with a standard deviation of 1005.861. This was used to project equity levels for the next five years, with the expected equity level increased by the mean observed change in equity each year, and with an annual inflation rate of three percent assumed and used to discount the current value of future equity levels. This allows for a sum total of expected equity values over the next five years to be computed, and gives a value for the final equity amount expected at the end of the projected period (2012 to 2016) in both future and current dollars, allowing for a more detailed, nuanced, and reliable estimation of the company's future value.

After expected values for the equity in the company had been established,…… [Read More]

Caledonia Focus on Project Free Cash Flows

Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project?

After studying the Caledonia case I came to the conclusion that the reason that Caledonia should focus on free cash flows is because the cash flows are where the firm receives and is able to reinvest. Also the firm is only interested in the free cash flows on an after-tax basis because they are the only ones available to the shareholder.

) What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings?

Even though depreciation is not part of the company's cash flow, it has a major effect on the different levels of cash flow over the life of the project as well as the effect on taxes. Sincems.e, depreciation is considered as an expense, the more one has of it, the bigger the expense. Consequently, profits are lowered and so are the taxes which are cash flow it.

3.) What is the project's initial outlay?

The initial cash outlay for Caledonia is as follows:

Initial Cash Outlay= Cost of…… [Read More]

Cash Management Practices

Cash Flow Management

Cash Management Practices in Arizona Parks and Recreation

The key to keeping any business, public or private, alive is to ensure that the available funds are properly allocated and that the amount spent monthly is less than or equal to the amount available. When it comes to state-run entities, one essential factor that each agency must take into account is their limited budget and the necessary holdings for any and all risks associated with that vein of the state (Office of Financial Management, 2010). One such agency that of late has constantly struggled with meeting its cash management goals is the Arizona Parks and Recreation. The primary focus of this analysis will review the park's specializations, risk allocations, and staffing practices.

The Arizona parks and recreation is responsible for the care of all state parks and community centers. Additionally, the division is responsible for events held within the parks, parades, and other public community events (Arizona Parks and Recreation). Among these specializations is the ability to keep the parks clean and functional, improve existing fixtures as needed within the parks, repair any damage to the parks, and in many instances allocate partial funds to the rebuilding of…… [Read More]

Cash Basis Verses Accrual Basis

Cash Basis vs. Accrual Basis

The cash basis of accounting is more likely to be used by service businesses than by retail or manufacturing businesses. Service businesses usually do not need equipment and can sell a service they perform with nothing more than their own hands and minds. Think of people who are lawyers, writers, public relations and advertising personnel, and accountants.. (Edmonds, McNair, Milam, and Olds, Fundamental Financial Accounting Concepts, 4th edition, McGraw-Hill Irwin, 2002) In the cash basis of accounting, the business records are "cash in" (deposits to the bank account) called cash receipts, and "cash out" (checks) called cash disbursements. Cash receipts - Cash disbursement = Cash flow. Each month's cash flow is added to the preceding month's cash balance yielding the current month's cash balance. Unless a business is a small service company, it cannot tell if it is earning a profit if it uses cash accounting. There are two reasons. The first reason is that cash receipts and disbursements related to the same business activity do not always fall in the same month. For example, a lawyer may perform a real estate closing in May, pay for real estate closing photocopies in May, and get…… [Read More]

Flow Inc Insurance Settlement Proceeds Are Treated

Flow Inc.

Insurance settlement proceeds are treated as operating cash flows under ASC 230. Thus the receipt of the $20 million would be operating. The investment of the $20 million into the company's pension fund would also be an operating cash flow. While normally investing money into the market is considered an investment flow, that is only when the beneficiary in the corporation. In this instance, the beneficiaries are the company's employees and the defined-benefit plan is a form of employee compensation. All employee compensation is considered an operating cash flow under ASC 230.

The flow should not be classified as an investing cash flow for two reasons. The first is that all insurance disbursements are classed as operating flows. The second is that employee benefits are also operating flows. If the funds were used to rebuild the facility, then that spending may be classed as an investing flow. However, that is not the case as the funds are being used for the benefit of the employees and are therefore not considered capital flows…… [Read More]

Cash Budget and Target Cash Balance the

Cash budget and target cash balance

The target cash balance is defined as the ideal cash amount a company intends to hold in its reserve at a given time. This figure seeks to strike a balance between the balance sheet costs of extremely little and too much cash. While a company with surplus cash at hand may misuse on investment opportunities, a company with poor cash will often be forced to make undesirable transactions to create more operating capital (Besley & Brigham, 2011). Individual investors are advised to set their target balance too. They may estimate at least the percentage of their holdings in cash to avoid such pitfalls.

Cash budget refers to the operating budgets and capital expenditures. It begins with the initial cash balances then cash inflows are added to the available cash. Cash outflows will then be subtracted to obtain the cash balance. If the cash balance falls below the company's intended balance, the financing segment will show the required borrowing. The financing segment covers debt payments among them interest payments. The financing activity adjusts the cash balance to obtain the ending cash balance (Ehrhardt & Brigham, 2009).

Compare and contrast the cash budget and long-term financial…… [Read More]

Managing Cash Week 17 Activity

Looking at the instrument company that is being examined, it is clear that they have very little working capital to utilize. Where, they have a total amount in working capital of £ 15,000. As the company paid out £1,700,000 in obligations and received a total of £1,825,000. This is important, because it shows that the business is undercapitalized, based upon their low working capital figures. As a result, the company needs to remain more liquid, to be properly capitalized for future investments

Table 17.3 Solution to a working capital problem in my organization

Problem identification

Low Working Capital

Analysis (investigation)

The working capital position of the company was affected by the total amounts of cash they invested in new inventory.

Conclusion to the analysis (results of the investigation)

The business needs to be able to control their cash position, to effectively manage their working capital.

The solution, listed as a set of SMART recommendations

NA

Strengths and weaknesses of the recommendations

The strength is that the underlying amount of working capital would improve. The weakness is that the company would invest in less inventory and other investments

The implications of the solution, if implemented

The solution of more effectively managing…… [Read More]

Dividends a Regular Cash Dividend Is Paid

Dividends

A regular cash dividend is paid out of the company's cash supply. The dividend can be at a fixed rate, or can be loosely tied to the company's net income. This is the most common form of dividend, and is paid under most circumstances. Whereas a regular cash dividend is a recurring dividend, an extra cash dividend is a non-recurring dividend (Investopedia, 2012). This is a one-time dividend that is paid by the company. There is no expectation of a future extra dividend, in contrast to a regular dividend. A special dividend is the same thing as an extra dividend. The only slight difference is that something termed a special dividend is not necessarily going to be paid out of cash. The company may pay with shares or some other asset. Most commonly, however, this type of dividend will be paid out of cash.

A liquidating dividend is fundamentally different from the other forms of dividend. The liquidating dividend is paid out when the business is in a state of liquidation, and the dividend is the amount that the shareholders receive. The other forms of dividend are typically paid as the result of ongoing business, using the proceeds of…… [Read More]

Firms Utilize to Pay Cash

This make it easier to finance firm operations by selling stock, but on the other hand the firm can be forced to pay shareholders when it needs the cash to finance its debt, invest in new projects, or simply to pay for its daily activities without going further into debt.

The final method is that of a hybrid method. Dividends are paid on a stable basis. But over the long-term, the debt-to-equity ratio is reviewed, and if the firm is regularly coming short on paying its debts and other expenses, payments to shareholders may be curtailed (How and why do companies pay dividends, 2010, Investopedia). This is the preferred method, given the added flexibility it offers the firm. Hybrid methods have the ability to ensure the firm's long-term financial health, as payments can be curtailed in times of sustained economic hardship -- but hybrid payments still offer stable returns for investors, in most instances.

How much cash should a firm hold?

On one hand, it might seem from an investor's point-of-view that it is always 'good' to receive more money in the form of larger dividend payments -- either 'special' dividends, regular payments, or in the form of stock repurchases.…… [Read More]

Profit and Have No Cash

will go up in the fourth quarter, they could end up ordering for more pieces of the same so as to satisfy the anticipated demand. Assuming that the company purchases 400,000 units of Product Q. At a total of $2,000,000, it would have only $100,000 left in its coffers. Assuming that the consignment arrives on time but the expected increase in demand for Product Q. does not come to pass, the company could be left holding stock worth $2,000,000. Although, the business is still profitable (assuming it continues to sell the normal 100, 000 units), it could find itself broke to an extent where it may not be able to finance capital projects. This is more so the case given that the normal revenues it gets could be tied up in other commitments. In other words, although the business could be making a profit, it could still be cashless.

A business could also find itself with no cash on hand despite making a profit in other numerous instances due to poor planning and imprudent decision making. This is more so the case in those instances where a business entity decides to make a prepayment for the future only for the…… [Read More]

Personal Cash Management Policies and Practices The

personal cash management policies and practices. The paper starts with by stating the methodology through which the content was collected for the relevant literature in the paper. The paper then presents a clear definition of what cash management is and presents an overview of some of the most utilized personal cash management practices. The literature review also presents numerous internal cash management policies and practices that can prove to be feasible and profitable on the personal level. The paper concludes with an overview of all the facts discussed.

Search Strategy

In order to collect relevant data for the results, concise and yet comprehensive information related to the topic have been compiled from articles published online individual researchers, practitioners, as well as, international research institutions. The aim of the study is to critically review the strengths and weaknesses of both conception and implementation of research pertinent to our topic -- Cash Management. This section also aims to present new questions raised by the research and their potential for future enquiry. The keywords used to collect data had been, "personal cash management," "cash management practices," "cash management policies."

As mentioned above, factors affecting personal cash management decision use are several, but only…… [Read More]

Amazon's Cash Cycle'so Much Shorter Than

Amazon's cash cycle so much shorter than that of competitor Barnes & Noble? How does this comparison affect financial management decisions of other retailers?

There are several reasons which explain why the Amazon Company has a shorter cash cycle than its competitor Barnes & Noble. First and foremost, Amazon is a much bigger company than Barnes & Noble both in terms of income and in the number of products that it sells. While Barnes & Noble sells some things besides book and ebooks, this is their primary product. Amazon sells everything including books, although this is a very small portion of their income. Another reason for this is that Amazon is doing better financially than Barnes & Noble. The ebook trend has bitten into Barnes & Noble's income, which they tried to combat by creating their own ereader, the Nook but this was far less successful than the Amazon ereader, Kindle and then Kindle Fire. Unlike Amazon which is highly diversified, Barnes & Noble is dependent on book sales which have continued to decline. Other retailers might look at this scenario and decide to lessen their interests in the sale of print books and to diversify their product so as…… [Read More]

Cross-Country Capital Flows and Currency International Project

Cross-Country Capital Flows and Currency

International Project

overseas investment .

GLOBAL INSTITUTES IN INTERNATIONAL FINANCE .

INTERNATIONAL FINANCE CORPORATION .

WORLD BANK .

WORLD TRADE ORGANIZATION

INTERNATIONAL MONTARY FUND .

INTERNATIONAL FINANCE IN CHINA .

BANKING INSTITUTES

NON-BANKING INSTITUTES

THE EXCHANGE RATE FIASCO

FINANCIAL CRISIS IMPACTS ON SINO-AMERICAN RELATIONSHIP

RECESSION'S AFFECT ON CHINA .

ASIAN MONETARY FUND .

CHINA'S TRADE POLICIES AND THEIR CONTRIBUTION TO THE FINANCIAL CRISIS

Monetary policy is the study of circulation of money, the granting of credit, the making of investments and the provision of banking facilities and international finance is studying it on an international level.[footnoteRef:2] Usually the affect can be seen in exchange rate and foreign investment and international trade. This includes the analysis of global financial markets, cross-country capital flows and currency, international projects, and overseas investments. [2: Merriam-Webster Online Dictionary: http://www.merriam-webster.com/]

US Monetary Policies have a far reaching effect on the other side of the world. Primarily due to U.S. Dollar being the reserve and default currency for trade transaction. Every time Federal Reserve decides to make a policy such as the recent Quantitative Easing (QE) where the U.S. will buy $600 billion of treasury bonds to boost economy and rising unemployment…… [Read More]

Managing Money Cash Is the Main Basis

Managing Money

Cash is the main basis of financial management in a new company. In most instances, the period between payment of suppliers and employees as well as a collection of debt from the customers is often a challenge. The solution to all these financial challenges is sound financial flow management. Managing of cash flow means delaying expenditures of cash and at the same time ensuring anyone owing the business pays up rapidly.

Managing Cash in a new business

Measuring of cash flow is necessary as accurate financial flow projection helps the business owner to be aware of an upcoming business challenge before it happens. On the other hand, cash flows should not be used to gauge the business environment in the future. There are a number of elements that need to be considered to counter the challenges. The factors are evaluating the payment histories of the customers, business thoroughness in identifying upcoming expenses, and the patience of the business vendors (Land & Taylor 2010).It is also crucial to ensure that receivables continue to come into the business at the same rate the business has been receiving them. Payables need to be extended as they have been in the past…… [Read More]

Technical Information on the Statement of Cash

technical information on the statement of cash flow, including what the main sections of a cash flow statement are, how to create each of them and what are the main elements that need to be gathered for a successful cash flow statement. The general format of a cash flow statement was discussed in the beginning so as to give an overview of what the CFS should usually contain.

One of the main issues that the document helped clarify was how the activities of a company can be included in one of the three categories mentioned (operating, investing or financing). In each case, the final figure on each of these CFS categories is important to reveal how the company is performing in terms of each specific operation.

Finally, the document referred to the several different methods that can be used to create a cash flow statement, including the advantages and disadvantages…… [Read More]

Electronic Cash and Smart Cards Forms of

Electronic Cash and Smart Cards

Forms of electronic cash came about in the 1990s with the rise of the Internet and a new way to do business. Smart cards were among the new forms. When purchasing products over the Internet, consumers have concerns about the privacy of their information with electronic payments. Some studies were conducted to evaluate the pros and cons of smart cards, how the security is designed in the payment systems, and if the use of smart cards can change the addictive behavior of gamblers.

Mondex

What it is

It is claimed the Mondex smart card can be used the same as cash and have the advantage of not having to carry cash at the same time. It was conceived as a technological solution to the handling of money and undermining the traditional role of the circuit of money. (Knights, 2007) The aim was to replace the need for cash. The Mondex smart card contains a microchip that holds the value of money. It can be downloaded to from a bank account and is held electronically. The card also stores the account holder's name, a unique identification number, and a record of the last ten transactions. (Knights,…… [Read More]

Finance the Fcf-Based Valuation Model Is Based

Finance

The FCF-based valuation model is based on the following formula:

EBIT (1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure

Investopedia, 2012)

is the free cash flow each year, C0 is the original cash outlay, and r is the discount rate. The free cash flows in this type of calculation are only those cash flows that are incremental to the investment decision. Thus, they do not include such non-cash items as depreciation or amortization expense, and they do not include either sunk costs or non-incremental flows like overhead allocations. The r is the discount rate, and the firm can select its discount rate from a number of different options. The most common, and arguably logical, is the firm's weighted average cost of capital. This reflects the firm's cost of equity, its cost of debt and its capital structure, with allowances for preferred shares as well if the firm has issued them.

There are two underlying logics to this model. The first is that the cash flows must be incremental, because the project should always be evaluated on the basis of its own cash flows, not other factors. The second is that the value…… [Read More]

HD Low Home Depot Lowe's and Wolseley

HD LOW

Home Depot, Lowe's and Wolseley are all companies in the hardware store business. Home Depot and Lowe's are primarily American while Wolseley has operations in a number of different companies but has its home market in the United Kingdom. All of these companies are highly susceptible to the economic conditions surrounding the housing market and the general health of the economy overall. This paper will focus on how these companies have fared in the past few years, specifically with reference to their statements of cash flows.

Cash Flow Analysis

For Home Depot, the most significant source of cash is from operations. Cash flow from operations contributed $6.651 billion in the 2012 fiscal year. Most of this derived from the net income. In all of the past five years, the company received most of its inbound cash from operations. In FY2008, this was the only year where Home Depot received inbound cash flows from another funding sources, in that case investing cash flows, which included the sale of a business was the major contributing factor.

The most significant cash disbursements in each of the past five years come from financing activities. In every year except FY2010 and FY2009, the…… [Read More]

Cheesecake Factory Profitability Analysis 5-Year

For comparison purposes, it also integrates the industry averages. This tripe presentation of the ratios allows for the comparison of the company's evaluation relative to itself, as well as its current comparison relative to the other players in the restaurants' industry.

Table 4: Financial ratios

2011

5-year average

Industry average

Price to earnings ratio

20.77

21.52

35.11

Sales

3.63

7.02

9.97

Debt to equity ratio

0.0

0.19

78.34

Gross profit margin

74.71

74.81

57.78

Net profit margin

5.28

4.28

1.49

Return on equity

NA*

11.7

10.22

Return on assets

8.3

6.1

6.15

Return on invested capital

14.7

7.52

7.38

* The return on equity cannot be collected as the company has not made public the total shareholder equity for 2010, with the last data in the annual report only revealing the equity for 2009.

* Data collected from Reuters and Forbes

Interpretation of the financial ratios:

The price to earnings ratio indicates values lower than the industry averages, revealing as such decreased investor expectations regarding future gains. Nevertheless, it is noted that the P/E ratio has increased when compared to its past values at the Cheesecake Factory, to as such indicate an increasing financial strength and enhancing possibilities for the…… [Read More]

Capital Budgeting the Projected Free

But even with no cost savings whatsoever, this project has a positive NPV.

We can see, therefore, that the greatest area of sensitivity is with the terminal value. The terminal value at present is worth $143 million of the NPV. If we break down the variables that go into the terminal value, however, we notice that the cost savings are critical. If SGA expense is not reduced, then the terminal value is reduced to $67 million and the total NPV for the entire project ends up being $98 million. This figure is less sensitive to the change in cost of goods sold.

We should also consider testing combined sensitivity of our shakiest projections. Sales may not live up to expectations and cost savings might not occur. If we assume no net income and no additional cost savings, the project will have an NPV. If we assume that our expectations for these will be cut in half, the project has an NPV of $121million. This is significantly lower than the original projection, but still well above the $95 purchase price.

7) If I were CEO of Nelson, I would approve the purchase, based on its positive net present value. I would,…… [Read More]

Tenet Healthcare Corporation Tenet Healthcare Corp This

Tenet Healthcare Corporation

Tenet Healthcare Corp

This paper examines the financial statements of Tenet Healthcare Corporation, reviewing their important components and discussing their interrelationship.

Tenet's annual report for the year ending December 31, 2011 provides information on the firm's financial health. The balance sheets provide information about what the company owns and what it owes. The income statements provide information about how much money Tenet earned and spent, and the cash flow statements show information about the exchange of money between Tenet and other parties.

Tenet's Balance Sheet

Tenet's balance sheet provides detailed information about its assets, liabilities and shareholders' equity. Tenet's assets are what it uses to operate its business, while its liabilities and shareholders' equity are two sources that support those assets. Tenet's liabilities are amounts of money that it owes to others. Shareholders' equity is the amount of money invested in the company combined with retained earnings; together they represent a source of funding for Tenet.

At the end of the fiscal year 2011, Tenet's total assets amounted to $8.46 billion, down slightly from $8.5 billion in 2010. Tenet's cash and cash equivalents are down significantly, from $405 million in 2010 to $113 million in 2011. These…… [Read More]

Understanding Financial Reports

Financial Reports

The company that I have selected is FedEx. The homepage of FedEx is located at:

http://www.FedEx.com/us/

There are other sources of information about the company as well. Its financials and stock information are available at MSN Moneycentral, at the following address: http://investing.money.msn.com/investments/stock-income-statement/?symbol=FDX

There are also numerous media sources for information about the company as well. These include Forbes and other business media. For example the following page notes that FedEx is one of the world's most valuable brands: http://www.forbes.com/companies/FedEx/

FedEx

UPS

Return on Assets

Net Profit Margin

Asset Utilization Rate

On these three measures, FedEx outperforms UPS on two of the measures. The company returns a better return on assets, and its net profit margin is higher. However, UPS has a better asset utilization rate. This is in part because UPS has a smaller proportion of fixed assets on its balance sheet, compared with FedEx, and UPS also has more revenue. However, FedEx is the more profitable company of the two, and that gives it a better margin and a better return on its total assets.

Overall, FedEx has a strong financial position. When looking at the different financial variables, it is clear that FedEx is generally a…… [Read More]

Lowe's Companies Inc Lowe's Companies Inc Lowe's

Lowe's Companies, Inc.

Lowe's Companies Inc.

Lowe's Companies, Inc.

Lowe's Companies, Inc.

This report discusses the home improvement retailer, Lowe's Companies, Inc. The report profiles Lowe's, providing information about its background, operations, size, and relative industry position, as well as lists key competitors. The report also includes a profile of the home improvement retail industry and discusses the current economic outlook and sales forecasts through 2015.

The report also analyzes Lowe's consolidated cash flow statements and discusses the company's sources and uses of cash. Lowe's cash inflows and outflows include the issuance of common stock, repurchase of common stock, repayment and issuance of long-term debt, and investments in property and store information technology.

In addition to reviewing Lowe's cash flow, financial analysis reviews Lowe's performance by comparing Lowe's key ratios to industry ratios. In general, ratio analysis shows Lowe's needs to improve its efficiency and generate more sales. Even though Lowe's is the second largest firm in the home improvement industry in terms of market capitalization, the company's performance lags behind its competitors in many areas.

Part I -- Company and Industry Profile

Lowe's is a $50.2 billion retailer of home improvement products and services. The company employs more than…… [Read More]

CFO & PV Finance Departments

Moreover, many firms do not groom their CFOs to one day take the top position, wary of just such limitations.

In many industries, CFOs are not suited to the CEO role, because their skills do not reflect the key competitive advantages of the firm. However, in many cases the CFO is in the best position to drive shareholder value, and their skills in evaluating and structuring mergers and acquisitions can prove invaluable.

2) 1. The present value of 5700 one year from now at 3.6% interest is $5,501.93. The present value of 8900 two years from now at 3.6% interest is $8,294.14. The combined present value of these two accounts is $13.796.07.

2. At a 5% discount rate, the NPVs of the cash flows are: Year 1 $43.809m; Year 2 $67.120m; Year 3 $57.877m for a total of $168.806m. At a 12% discount rate the NPVs of these flows are: Year 1 $41.071m; Year 2 $58.992 m; Year 3 $47.689 m for a total of $147.753m.

At a discount rate of 10% the NPVs of the cash flows are: Year 1 $41.818M; Year 2 $61.157m; Year 3 $50.338m for a total of $153.313m. At a discount rate of 8% the…… [Read More]

Pepsico Auditors Subsequent Acts Trends Assets Liabilities

PepsiCo

Auditors

Subsequent Acts

Trends

Assets

Liabilities

Stock

Income Statement Presentation

Income Statement Items

Net Income Trend

Comprehensive Income

Cash Flow Statement

Cash Flow from Operations

Cash Flow from Investing Activities

The annual report of a company contains the information required for outsiders to assess the company's financial condition. In order that this is possible, a substantial amount of information must be gathered and presented in a format common to all companies. The official annual report document, the 10-K, must be filed by all public American companies, and many also include an informal annual report along with this document. This report will analyze the annual report of PepsiCo in order to better understand the company.

Auditors

PepsiCo's auditor is KPMG. They provide their opinion on page 81 of the 2011 Annual Report. The opinion of KPMG with respect to the financial statements is as follows: "In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PepsiCo, Inc., as of December 31, 2011 and December 25, 2010, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 31, 2011,…… [Read More]

Functions of Financial Markets and Discusses Why

functions of financial markets and discusses why a dollar tomorrow cannot be worth less than a dollar the day after tomorrow. Furthermore, the paper explains the cash flows associated with a bond to the investor. And discusses the term "price-earnings (P/E) ratio." In addition, the paper discusses the certainty equivalent approach to estimating the NPA of A project and discusses the problems associated with capital investment process. Lastly, the paper contrasts and compares capital budgeting and strategic planning assesses the agency problems associated with capital budgeting.

Explain the functions of financial markets

The existence of the financial market is just to help and maintain the relations between the users of the capital and the providers of the capital. They also provide an opportunity for both the parties to do transactions with mutual benefits. It is there so that the investor and the investment can do the business smoothly and at ease. They offer a pricing function for both the parties that mean both the seller and the buyer are provided with reasonable evaluation of assets in the financial markets. Then another point that has to be kept in mind is that the financial markets are properly regulated which further motivates…… [Read More]