Method of Calculating the Net Cash - Essay Example

Summary

This essay talks about two companies - Ford Motor Company and General Motors which are found to be using the indirect method for calculating net cash being generated from their respective operating activities and consider net income the main element for determining the cash amount…

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Subject: Finance & Accounting
Type: Essay
Level: Ph.D.
Pages: 3 (750 words)
Downloads: 2
Author: sydney25

Extract of sample "Method of Calculating the Net Cash"

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The essay "Method of Calculating the Net Cash" talks about two companies - Ford Motor Company and General Motors which are found to be using the indirect method for calculating net cash being generated from their respective operating activities. Justifiably, it has been evident from the proforma of the cash flow statement that both the companies considered net income, instead of sales and revenue, to be the main element for determining the cash amount generating particularly from the operating actions, which related to the above discussed indirect method of computation.

The most significant item in the financing section of both the selected companies is identified to be a dividend paid (cash), as they are bound to pay dividends to its shareholders for encouraging them to make further investments. The net cash provided by the operating activities of Ford reveals increasing trend within the last 3 years, as can be observed from the statement that the net cash in the year 2012 generated an amount of $9,045 million, which increased to $10,444 million by the year 2013 and $14,507 million in the year 2014.

On the other hand, in the case of General Motors, a fluctuating trend in net cash provided by operating activities can be apparently noted. Justifiably, as per the statement, it has been recorded that the net cash has been decreased in terms of change during the period of 2012-2013, which stood at $1.4 billion, as compared to that of the period 2013-2014 that accounted to $0.9 billion.

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