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.

Railroad Stock Investments – The Standard of Measurement to Buy and Sell Railway Stock

The transportation sector of the United States economy is comprised of nine industrial groups.  One particular group moves more volume of tonnage based on ton miles than any other form of transportation – Railroads.  In accordance with the Federal Department of Transportation, railroads move 39.5% of all freight in the US (based on ton miles which is the length freight travels).  It’s a $60 Billion industry with over 140,000 miles of track.  It is dominated by seven major carriers (referred to as Class I Railways).

Price to Cash Flow

Price to Cash Flow Ratio

The price to cash flow ratio is a valuation tool used to assist buyers and sellers of stock in determining timing of purchases or the disposition of shares.   Unlike the other valuation ratios, this particular ratio utilizes the cash flows statement in determining the outcome.   The formula is simple:

Price to Cash Flow = $Market Price of a Share of Stock/Cash Flow in Dollars Per Share of Stock

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.

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.

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