Acc 206 Week 1 - Discussion Question// A+ - 65495

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What information does the cash flow statement provide that you cannot see in the other financial statements (income statement, balance sheet, owner’s equity)? What elements of the cash flow statement do you think are most important for company management to monitor and why? Is this different for investors?

Guided Response:

Review your peers’ postings. Respond to at least two of classmates, letting them know whether you agree with the use of the cash flow statement and why. Additionally, share elements of the cash flow statement that you see as being the greatest interest to investors (as opposed to internal management) and why.

Week 1 - Discussion 2

Go tohttp://finance.yahoo.com. Enter in “AAPL” and click on the “get quote” button, and it will bring up information on Apple. On the left hand side you’ll see a section on Financials. Within that section, click on the cash flow. Review the cash flow statement for Apple. How would you summarize Apple’s cash flow position and what does this statement tell you about where the money is coming from and where it’s going? What would you suggest Apple’s do to improve its cash position and why?

Guided Response:

Analyze several of your peers’ postings. Do you agree with the posting? Let at least two of your peers know what you would add.

 

Solution Description

 

1

The income statement is made on accrual basis; it means that all revenues and expenses related to a particular period are shown, regardless of its conversion into cash.  While balance sheet shows the amount to be received, payment to be made, payment made in advance and payment received in advance.  The statement of owner’s equity shows the movement in owner’s account whether in the form of cash in the form of profit or loss.  While the cash flow statement is purely based on cash it means that any revenues and expenses shown in the income statement but not converted into cash will not be shown in the cash flow statement.  The change in balance sheet account as compared to previous year will help in determining the movement of cash, which also includes the changes in owner’s equity account balance.  The cash flow from operating activities is the most important element of cash flow statement, if the cash flow is not generated from operating activities, there will be no use of investment and also the repayment of debts will be difficult.   It is very critical for management to make sure that the cash flow is generated from operating activities.  However, the investors will not be satisfied if the dividend is not paid, and the payment of dividend is subject to free cash flow, which is equal to operating cash flows less net investment made in capital expenditures to run the operati

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