any accounting students?? (1 Viewer)

[yeah]

hey there,

well ive got these few questions which im trying to answer as part of my notes... i didnt know then in a quiz, and still dont!
but ive been sick and missed several weeks of classes and lectures
so any help would be greatly appreciated


A) to what extent is cash from operations ($85 million) covered by net profit ($110 million)? Why are the figures not the same?


B) a company has consistenty over the past 4years shown negative cash from operating activities, negative cash from investing activities and positive cash from financing activities. what is most likely to be happening? is this good or bad news?


C)evaluate the comment "accounting information for management is a useless unit in a generalist non-accounting degree"



thanks!!!

 

[Shell]

Erm, im majoring in Accounting but i can only answer your question B off the top of my head.

In a cash flow statement, Business's expect (or at least hope) that cash flows from operating activities are positive. This would be because cash flows dont include non cash expenses like depreciation so cash flows from operating activities would normally be higher than the profit recorded.

Cash flows from investing activities are normally negative. Thsi is because most types of fixed assets wear out and because companies tend to seek to expand their asset base, cash is normally directed out of the business, therefore the figure for cash flows from investing activities should be negative.

Cash flows from Financing activities can go in either direction, depending on financial strategies. Since companies seek to expand, generally, there is more money coming into the business in this area, rather than leaving it. So, ideally, it would be a positive figure.

in your question you have negative operating cash flows, negative investing cash flows, and positive financing cash flows. this is not as good as it can be, but fairly reasonable.

Basically its only problem area is operating activities. they should look at the amounts of money they are using to buy inventory, and general expenses like rent and wages. and also, how efficiently they are recieving their accounts recievables.


i hope that helps. and that its right. ask Brogan77 he knows lots

 

[krisk85]

aahhaha those r the questions i got in my accounting information for managers quiz lolll