Comment on two peers post in 100 word count each below under the line
Cash flow is key to a business’ success and survival. A company must be able to answer at least two basic questions about their cash flow:
1. What is my cash balance right now?
2. What do I expect my cash balance to be six months from now?
What are some examples in your experience of cash flow projection methods in your company or companies that you have worked for in answering these questions?
You can perform an Internet search on “cash flow projections” for ideas.
By Patty: Cash Flow Projections
I am not a financial employee at my current place of business, however, I do understand how cash flow and cash balance can effect a budget for a business and how it will operate in its current state as well as in the future. There are many different methods when analyzing cash flow projects. One popular way is what is referred to as a direct cash flow method (Berry, 2019). In this type of cash flow projection it links multiple projects together to come to a consensus on the current cash balance based on those factors considered. Profit and loss as well as a balance sheet are linked together in a direct cash flow method to obtain the cash balance for a business. This is how we figure our yearly budgets at my current place of business. The majority of our expenses do not show up throughout the year on a profit and loss statement until the financials are receipted back into the accounts when received and once the accounts are reconciled on a monthly basis. This allows the Finance Director to track the available cash balance within each budgeted line item from month to month. The balance sheet aids in this projection as well by allowing for the itemized balance of income and expenditures to be tracked over what ever period of time is desired. In my place of business we do this monthly, however, in some businesses they may want to carry this out on a bi-annual basis.
A company always makes some important reports to keep a record of financial activities. It includes an income statement, balance sheet, and cash flow statement. Cash flow statement explains how a company manages its cash or how it generates its cash in an effective way to pay all its debts and utilize in different operating expenses. It breaks downs the cash analysis into investing, financing and operating activities. It is important for a company to answer that what is its cash balance at the current time and what its expectations for the coming six months are. Cash balance is the amount of money which a company has in its bank account at the end of a particular time (month, quarter, six months or year). For Cash flow projection methods the example of Elite Service Co is used for answering the questions of discussion. The cash balance of Elite Service Co for June 30, 2017 is $4600 according to the example (P1-3A) in chap 1 while for next six months the cash balance is estimated around $4200. The Cash flow projection is used to forecast whether the company can repay on time or not. It helps the investors to judge liquidity of a company. With the help of cash flow projections, companies can compare actual results with the previously projected cash flows. This helps them in understanding where companies need adjustments.