ABC company has recently hired me as the new Corporate Comptroller. They are a company that specializes in the production of cedar roofing and siding shingles. The company is looking to reach $3 million over the course of the next 3 years. Recently sales have reached $1.2 million so the company is looking at a $1.7 million increase in 3 years. My job is to develop a new plan that incorporates using shingle scrap materials to build cedar houses. Incorporating this new plan will comes with it’s share of challenges due to an increase in cost and labor, but the additional gross profit and revenue will assist in reaching the target amount of $3 million. In this paper, I will be going over the report I created for the CEO of ABC based on …show more content…
Cash Flow ( Direct method) Cash received from customers 12,000 less cash paid for: Inventory 63000 Salaries 46000 Rent 32000 Interest Other operating expenses 40000 Income Taxes 3000 184000 Net cash provided by operating activities (172000) 1. What does this statement of cash flow tell you about the sources and uses of the company? The cash flow statement gives me a view between the balance sheet and income statement. The main sources of income come from the regular sales and the sales of stock. 2. Is there anything ABC Company can do to improve the cash flow? The company could benefit by reducing their inventory, selling more of their stock, and selling assets that aren’t directly related to production of the company, while improving the method of collecting their account’s receivables. 3. Can this project be financed with current cash flow from the company? Why or why not? The current cash flow of -$172,000 will not allow the company the financing to fund this project. In order to continue the project they would
The statement of cash flows directly or indirectly reflects an enitity’s cash receipts which is classified by major sources and its cash payments classified by major uses in a period. It provides useful information on the entity’s cash generating activities
* The company cash flow is unreliable especially in the early stages of a new product development
EEC calculated the amount of time involved the anticipation of its cost ($3 million). The timeline in recovering their cost of investment ($2 million) initially for the foundation of this investment any profit made in the future of this investment will be justified as a profit for the company. If EEC can anticipate a fast return on its investment it is a profitable wise decision in making the investment financial, it is considered to be an easier way of formulating investments financially. On the basis of one year all cash flows is added together equal to the sum of $2 million originally invested, then it is divided by the annual cash flow of $500,000. The calculation of the payback period would equal four years. After this time frame any financial proceeds will be considered profitable for the company. I conclude that the timeframe is adequate in comparison of the investment in this worthwhile investment financial venture for the company.
As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing.
The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of a company during a period in a format that reconciles the beginning and ending cash balances
According to his financial model, the investment generates positive cash flow, excluding the initial investment, over the life of investment. This indicates further capital will not need to be raised for
As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing.
The cash flow statement shows the amount of cash within a company. Items that affect the cash balance are listed on the statement. The first section of the cash flow statement is operating activities, which shows the cash flowing in and out of the company in relation to its business operation. The operating activities section also includes net income and the change in dollars of certain accounts listed on the balance sheet. The next section, investing activities, shows cash the company received and spent on a company's capital investments. The financing activities section shows the inflows and outflows of cash related to the company’s issued financial securities, which is also listed on the balance sheet and statement of shareholders' equity.
The cash flow statement consists of three parts: cash flows provided by operating activities of $13,831, cash flows provided by investing activities, and cash flows provided by financing activities effect of exchange rate changes on cash and cash equivalents of ($204)
Depending on how much additional investment needed and what will be the payback period. Another cash flow statement will be needed for further reviewing to decide whether additional funding will be a good
Financing requirements of the company can be determined by calculating the cash requirements of the company by adding the working capital needs and capital expenditure needs of the company. Working capital needs can be calculated by subtracting current liabilities from current assets of the company. Current assets of the company will remain significantly lower than current liabilities for next three years. Working capital needs of the company come out to be $17.523 million, $21,028 million and $21,028 million for years 2010, 2011 and 2012. Capital expenditures of the company will remain at $0.9 million for all three years. Adding the values of working capital needs and capital expenditure needs for all years and by subtracting these values from net income, we can calculate the external financing required by the company to meet the cash needs for next three years. As shown in calculations in excel sheet, external financing requirements for the company come out to be $15.231 million for 2010 and $18.091 million for 2011 and 2012 respectively.
The ABC Company is a manufacturing company that specializes in making cedar roofing and siding shingles. The company has plans on expanding its business to include building cedar dollhouses. A controller is an individual who has responsibility for all accounting-related activities within a firm. In most organizations, the controller is the top managerial and financial accountant. The controller supervises the accounting department and assists management in interpreting and utilizing managerial accounting information. As being the new controller of the company, I have been assigned to oversee a new plan that was presented by the CEO. The plan is to reach the $3 million mark over the next three years. This plan will bring risk and
4. What kind of debt (agency debt, bank debt, or Rule 144a bonds) should the sponsors of the project use to fund the deal? What are the advantages and disadvantages of each kind of debt? In your view will project bonds receive an investment grade rating? What is the“weakest link” of the project? How can they improve the likelihood of getting an investment grade?
The firm’s accounts receivable ratio increased from 68.71 in 2006 to 74.56 in 2010. This means that it is taking Abbott almost six days longer to collect from its customers today than it did five years ago. Furthermore, the firm’s accounts payable days has decreased from 43.72 in 2006 to 38.22 in 2010. This means that Abbott is paying its suppliers 5½ days earlier today than it did in 2006. A change in the inventory ratio from 8.01 in 2006 to 11.03 in 2010 indicates that it is taking the firm longer to sell finished goods than it used to. The increase in the accounts receivable and inventory ratios, combined with a decrease in the accounts payable ratio, indicates poor working capital management and helps to explain why the firm has increased its holdings of cash and short-term investments. To correct this, Abbott’s managers should focus on collecting cash from its customers faster and delaying payments to its suppliers. To maximize its cash position, the firm would be best served by paying its suppliers in the same amount of time as it collects payment from its customers.
They will end up with 6.3 billion external funding needed. While in the long-term, the operating cash flow increased but the capital expenditure increased also. They actually will end up with 6.6 billion dollar needed to finance.