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2-2 Journal Financial Statements and Cashflow Management

Ayanna Knight

Southern New Hampshire

FIN-320-X2129 Principles of Finance 21EW2

November 6, 2021

Financial Statements and Cashflow Management

I have chosen Johnson and Johnson business for my project. It is a property company betrothed in research and expansion, production, and sale of various products in the health care field. It is an American multinational corporation founded in 1886 (Nguyen, 2020). the company functions through three sections which include medical diplomacies, consumer, and pharmaceuticals. The company focuses on producing human health and well-being-related products such as skin and hair care products, baby oils and powders, beauty products, clean and clear facial wash, brands of bandages, among others.

Johnson and Johnson balance sheet

Johnson and Johnson cash flow statement

Johnson and Johnson income statement

Financial statements are critical because; they provide a snapshot of a company’s financial strength, giving vision into its performance, procedures, and cash flow. They help in providing the company's information about its revenue, expenses, profitability, and debts. With financial information, the company can assess whether it is going forward or making losses. Likewise, financial statements help the company identify areas that need improvement to ensure the company goals are met within the set duration (Kahn & Baum, 2020). Likewise, with financial statements ready, the company can know the debts it has to come up with a good plan on how to settle those debts. This will help the company build a good relationship with creditors and suppliers.

Good cash flow management ensures that the company has money available for paying expenses when they are due. It ensures businesses continue to trade. The higher the cash flow and the owner the Days Sale Outstanding (DSO) is, the better the financial position the company is in. likewise, strong cashflow provides companies with opportunities to invest in growth, such as building a new location, doing a lot of research, renovating, providing training to staff among many other. Moreover, good cash flow management may help in cutting expenses depending on what the flows reveal.

References

Kahn, M. J., & Baum, N. (2020). Basic accounting and interpretation of financial statements. In The Business Basics of Building and Managing a Healthcare Practice (pp. 13-18). Springer, Cham.

Nguyen, H. (2020). Johnson & Johnson Company.