Cash Flow and Financial statement Analysis

In this unit, you are

learning how to examine financial statements using several methods of analysis and how to use ratios. As a business owner you must monitor cash flow in order to make sure bills are being paid on time and cash is being received from customers. Monitoring cash flow can help you determine if you have enough resources to expand, purchase new equipment, or even invest in other securities or companies. In addition to the Cash Flow Statement, business owners can use the horizontal, vertical, and ratio analysis to evaluate a company’s performance. These tools are beneficial in monitoring revenue and expenses as well as measuring performance against competitors.

Discussion Questions

Imagine you own a business and you need to prepare a cash flow statement, and both a horizontal and vertical analysis. Please discuss the following information in your initial post:

• Briefly describe your business.
• What information will you need to prepare the cash flow statement?
• Which method will you use to prepare the cash flow statement? Why?
• How can a horizontal analysis help you evaluate the performance of your company? Vertical Analysis? Which analysis do you think is more important or relevant as a business owner?

Now imagine you are applying for a small business loan. You have all the financial statements prepared and the bank requests you to calculate three different ratios: working capital, acid test ratio, and current ratio.

• How do you calculate working capital, acid-test ratio, and current ratio?
• Why do you think banks or creditors look at these three particular ratios?
• Do you feel these ratios are important to monitor or do you feel other ratios are just as important?

Please provide an appropriate subject bar that captures our interest and gives us an idea as to what your post is about.

Be sure to cite any sources that you use with APA. Wikipedia is not an acceptable source.