2Discussions, 2 Journal Articles Need

Managerial Finance

Discussion Topic: - Cash Flow and Financial Analysis

BA62070H419 Managerial Finance

Name: - Rohan Somaiya

ID: - 586077

Importance of cash

Cash is one of the important elements in business. Every business keeps the track of the cash flow in the organization. Cash generation is the fundamental responsibility of a business. Any company exists to make profit and try to expand using the money earned. Companies usually have long-term and short-term goals. In order to achieve those, the goals need to be funded properly. There are some long-term funds for which the investment happens for a larger period of time and the benefits are generated after a longer period of time. But there are some small term goals which are fulfilled using small investment for shorter period of time. They are usually instant investment. Companies with large piles of money are far more stable than the company whereas to the company where there is less money. Cash flow basically means the amount of money that goes in and come out of the company. There are companies which have positive cash flow but are still making loses and there are companies which have negative cash flow but still making profits. Companies pay close attention to their cash flow and monitor the ways by which cash flow can be generated.

Application of concepts/ Financial analysis

Financial analysis may be defined as understanding the financial performance of the company. To understand if the company if making profit, it is important that the company should look at the income statement. To understand the assets and liability of the company, balance sheet plays an important role. Financial ratios play an important role in analyzing the performance of the company. Many other factors which are considered to evaluate the financial statement are gross profits, operating margin, operating leverage and net margin. Balance sheet, cash flow and Income statement are used to analyze the whole picture together. Knowing the financial stability of the company, will help the company to make decisions regarding the investment and savings. Managers will know in advance the credibility of their firm and will expand accordingly. Some companies where the finances are not that strong, many assets or other aspects are sold out to get the money for the company.

References:

Kokemuller N. (n.d.). Importance of Cash Flow to a Business. Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/importance-cash-flow-business-57376.html

Carlson R. (2020, January 25) Is Cash Flow the Same as Profit?. Retrieved from https://www.thebalancesmb.com/are-a-firm-s-cash-flow-and-profit-different-393585

Lesonsky R. (2014, June 11) 12 Easy Ways to Successfully Manage Your Cash Flow. Retrieved from https://www.americanexpress.com/en-us/business/trends-and-insights/articles/12-easy-ways-to-successfully-manage-your-cash-flow/

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