Cash Flow

The ability of a business to turn its assets via production into cash. It is typically measured in dollars and is reported in a separate financial statement at the end of the accounting cycle.  There are several articles that discuss cash flow, how it is calculated and some issues are explained on this site.

Cash Flow From Operations – Understanding Cash Flow (Part II)

Cash Flow From Operations - Understanding Cash Flow (Part II)

To understand the cash situation, the cash flows statement is an additional report included in financial statements to basically convert the accrual basis balance sheet and income statement into a cash basis report.  This way, management gets the best attributes of both accrual and cash basis accounting.

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Cash Flow From Operations – Basic Formula

n a pure cash only operation, the profit as reported on the income statement would also be cash flow from operations.  But modern-day business is not pure in how it is conducted.   Companies agree to pay suppliers at a later time, payroll is weekly or monthly, benefits that are paid in the future are offered to employees, credit is extended to customers; the list can go on and on.

Accounts Payable Turnover Rate (Ratio)

Accounts Payable Turnover Rate

The accounts payable turnover rate is a business activity ratio measuring the frequency of the company’s ability to pay its vendors and suppliers.  The numerical value is customarily reported as an annual value.  The higher the number, the more often the payables are cleared (paid).  A ’12’ would indicate that all payables are paid every month (360 days/12 = 30 days).  Ideal values exceed 20 as this indicates all accounts are paid on average at least every 18 days (360 days/20 = 18 days).

Gathering Data from Sales

Sales Data

In business the best source of new business is the existing customer.  Discovering the customer’s habits and characteristics allows the sales department to expand into new geographical territories with similar customer characteristics and/or modify the existing product lines.  The key to success is gathering the proper information at the point of sale.

Fixed Assets To Debt Relationship

Fixed Assets to Debt Relationship

Every business owner, especially young entrepreneurs, must understand how long-term debt  is used to finance the purchase of fixed assets . It is a basic principle especially for start-ups. There is a relationship that exists between the two. If created correctly, profitability is enhanced and cash flow is maximized.

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Cash Flow – Introduction

Cash Flow

Insolvency is defined as the inability to pay liabilities as they come due. To meet the demand of creditors cash is required. For most small businesses there are as little as a single source to multiple sources of cash.

Financial Statements for the Small Business

Financial Statements

Financial statements serve the purpose of presenting economic activity and status related to a particular date and over a particular time frame.  Accountants record monetary transactions and via financial reports present the information in an easy to understand format.  The financial statements for a small business do not have to comply with those of publically traded operations.

Accounting

Accounting

Accounting refers to the business function of recording economic activity.  Accounting includes the processing of information and a reporting role.   The accounting term encompasses a broad range of functions for every business.  It starts out with a system of gathering economic information, categorizing the material, inputting the data into an accounting program, and generating outputs for decision making.

Insolvency and Bankruptcy – Know the Difference

Insolvency and Bankruptcy

Every business owner needs to know the difference between insolvency and bankruptcy.  Often these two terms are misunderstood and improperly used in conversation.  You need to know their correct meaning because both are used in civil law and both have different issues to address during the process.  In addition, understanding these two terms builds a better comprehensive understanding of financing your business.

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