Question

Chapter 6 Review Essay: Annual cash flow analysis

I need a 2 paragraph about this.

Answer 1

The statement of cash flows, or the cash flow statement, is a financial statement that summaries the amount of cash and cash equivalent entering and leaving a company. The cash flow The statement of cash flows, or the cash flow statement, is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. The cash flow statement (CFS) measures how well a company manages its cash position, meaning how well the company generates cash to pay its debt obligations and fund its operating expenses. The cash flow statement complements the balance sheet and income statement and is a mandatory part of a company's financial reports since 1987.It's important to note that the CFS is distinct from the income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit. Therefore, cash is not the same as net income, which on the income statement and balance sheet includes cash sales and sales made on credit.

Here is some notation we will use:

Computed quantities:EUAC = Equivalent Uniform Annual Cost,EUAB = Equivalent Uniform Annual Benefit

EUAW or EUAV = Equivalent Uniform Annual Worth or Value

Cash flow elements:

P = Asset initial cost ,SV = Asset salvage value end of life,R = Rebuild,Rev = Revenue in a year.O&M = Annual Operating and Maintenance costs in a year.In this section we determine the equivalent uniform annual cash flows for costs and benefits in contrast to the equivalent present value of the cash flows calculated in the previous chapter.We can calculate separately the EUAC or EUAB, or we can calculate the composite which can be called the EUAW or EUAV—different names for the same quantity.Each of the cash flow elements above is either a uniform annual value or it must be converted to an annual value. For example, if we are given a constant (uniform) annual revenue, we use it as it is. On the other hand, the initial cost of an asset, P, is specified at a particular time; therefore we must calculate its EUAV. Another possibility would be when a cost is described as an arithmetic gradient; this must be converted to its EUAV. We learned how to do this in earlier chapters.The initial cost of an asset is the cost to purchase and install it, as well as any ancillary costs, such as surveys or taxes associated with the acquisition of the asset.

A cash flow statement is one of the most important financial statements for a project or business. The statement can be as simple as a one page analysis or may involve several schedules that feed information into a central statement.

A cash flow statement is a listing of the flows of cash into and out of the business or project. Think of it as your checking account at the bank. Deposits are the cash inflow and withdrawals (checks) are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time.

A cash flow statement is a listing of cash flows that occurred during the past accounting period. A projection of future flows of cash is called a cash flow budget. You can think of a cash flow budget as a projection of the future deposits and withdrawals to your checking account.

A cash flow statement is not only concerned with the amount of the cash flows but also the timing of the flows. Many cash flows are constructed with multiple time periods. For example, it may list monthly cash inflows and outflows over a year’s time. It not only projects the cash balance remaining at the end of the year but also the cash balance for each month.

Working capital is an important part of a cash flow analysis. It is defined as the amount of money needed to facilitate business operations and transactions, and is calculated as current assets (cash or near cash assets) less current liabilities (liabilities due during the upcoming accounting period). Computing the amount of working capital gives you a quick analysis of the liquidity of the business over the future accounting period. If working capital appears to be sufficient, developing a cash flow budget may not be critical. But if working capital appears to be insufficient, a cash flow budget may highlight liquidity problems that may occur during the coming year.

Statement (CFS) measures how well a company manages its cash position, meaning how well the company generates cash to pay its debt obligations and fund its operating expenses. The cash flow statement complements the balance sheet and income statement and is a mandatory part of a company's financial reports since 1987.It's important to note that the CFS is distinct from the income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit. Therefore, cash is not the same as net income, which on the income statement and balance sheet includes cash sales and sales made on credit.

Here is some notation we will use:
Computed quantities:
EUAC = Equivalent Uniform Annual Cost
EUAB = Equivalent Uniform Annual Benefit
EUAW or EUAV = Equivalent Uniform Annual Worth or Value
Cash flow elements:
P = Asset initial cost ,SV = Asset salvage value end of life,R = Rebuild,Rev = Revenue in a year.O&M = Annual Operating and Maintenance costs in a year.In this section we determine the equivalent uniform annual cash flows for costs and benefits in contrast to the equivalent present value of the cash flows calculated in the previous chapter.We can calculate separately the EUAC or EUAB, or we can calculate the composite which can be called the EUAW or EUAV—different names for the same quantity.Each of the cash flow elements above is either a uniform annual value or it must be converted to an annual value. For example, if we are given a constant (uniform) annual revenue, we use it as it is. On the other hand, the initial cost of an asset, P, is specified at a particular time; therefore we must calculate its EUAV. Another possibility would be when a cost is described as an arithmetic gradient; this must be converted to its EUAV. We learned how to do this in earlier chapters.The initial cost of an asset is the cost to purchase and install it, as well as any ancillary costs, such as surveys or taxes associated with the acquisition of the asset.

A cash flow statement is one of the most important financial statements for a project or business. The statement can be as simple as a one page analysis or may involve several schedules that feed information into a central statement.

A cash flow statement is a listing of the flows of cash into and out of the business or project. Think of it as your checking account at the bank. Deposits are the cash inflow and withdrawals (checks) are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time.

A cash flow statement is a listing of cash flows that occurred during the past accounting period. A projection of future flows of cash is called a cash flow budget. You can think of a cash flow budget as a projection of the future deposits and withdrawals to your checking account.

A cash flow statement is not only concerned with the amount of the cash flows but also the timing of the flows. Many cash flows are constructed with multiple time periods. For example, it may list monthly cash inflows and outflows over a year’s time. It not only projects the cash balance remaining at the end of the year but also the cash balance for each month.

Working capital is an important part of a cash flow analysis. It is defined as the amount of money needed to facilitate business operations and transactions, and is calculated as current assets (cash or near cash assets) less current liabilities (liabilities due during the upcoming accounting period). Computing the amount of working capital gives you a quick analysis of the liquidity of the business over the future accounting period. If working capital appears to be sufficient, developing a cash flow budget may not be critical. But if working capital appears to be insufficient, a cash flow budget may highlight liquidity problems that may occur during the coming year.