StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Construction of the cash flows - Essay Example

Comments (0) Cite this document
Summary
There often confusion as which money outflow should be included as capital assets and which money outlays are part of operating expenses. Research and development expenses, electricity, water, light and office rent are usual items falling under operating expenses…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94% of users find it useful
Construction of the cash flows
Read TextPreview

Extract of sample "Construction of the cash flows"

Download file to see previous pages The users of the financial statements are very interested to learn how the business generates and uses it cash and cash equivalents during a particular period. Thus, the statement of cash flows is very important because the company wants to control the timing of the receipt and disbursement of cash. For, the company needs cash inflows to pay the budgeted and maturing cash outflows such as payables. The cash flow statement clearly shows the company management's ability to juggle the incoming and outgoing of funds.
Also, cash inflows from operating activities are defined as those coming from it revenue generating activities. In our case, the airline tickets are bought because they need to visit the different revenue generating shops in different parts of the United States.
Capital Budgeting (Maher, 1997; 279-20) involves deciding which long term investment to undertake and how they are financed. Examples are buildings, land, factory site, factory equipment and others. Furthermore, an item is capitalized, meaning recorded as building, equipment, factory and others, if they are tangible assets held by the enterprise for use of production of goods for sale and rendering services. And, the asset bought will be used over a period of more than one year. Thus, the airline tickets only benefit the day or the current accounting period when the flight was taken. Thus, the airline tickets do not fall under capital expenditures but only operating expenses.
In the construction of the cash flows associated with the commercial airline contract option, should the analyst include the average cost of business class tickets
Yes, because the average cost of business class tickets involves cash flow or cash disbursement or cash payment. As discussed above in the theory of accounts it is part of operating expenses in the cash flow statement.
Appendix A shows that for an annual average of 48 annual trips consisting of 4 travelers per trip at $1,000 per round trip ticket, the annual cost for this specific year is $192,000. Also, for the following year at 50 trips at 4 persons per trip the total cost for that year in terms of plant tickets is $200,000. the continues the computation until the year reaches 79 flights in 1 year at 4 persons per year totaling $316,000.
QUESTION
In construction of the cash flows associated with the commercial airline contract option, should the analyst include the cost of upgrading a business class fare to a first class ticket
yes, for the same reason above. The average cost of upgrading a business class ticket to a first class ticket involves cash flow or cash disbursement or cash payment. As discussed in the theory of accounts, it is part of operating expenses of the company to support its day to day operational management
Appendix B below shows that for the year when there are 48 airline travels consisting of 4 persons per trip, the first class ticket at $1,300 per ticket will increase the ticket cost on this particular year to $249,600. This is $57,600 bigger than the computation of ticket at costs in Appendix A below. Also, for the year when 50 flights with 4 persons at $1,300 first class, the total airline ticket costs for that year is $260,000 which is higher than the above data by where the business class total cost for the year is only $200,000. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Construction of the cash flows Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Construction of the cash flows Essay Example | Topics and Well Written Essays - 1000 words. Retrieved from https://studentshare.org/miscellaneous/1531171-construction-of-the-cash-flows
(Construction of the Cash Flows Essay Example | Topics and Well Written Essays - 1000 Words)
Construction of the Cash Flows Essay Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/miscellaneous/1531171-construction-of-the-cash-flows.
“Construction of the Cash Flows Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/miscellaneous/1531171-construction-of-the-cash-flows.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Construction of the cash flows

Embracing cash flows

...?(Dissertation Proposal Form) Part Some Personal Information Your Email Id: Your Phone Number: Part 2: Topic Area, Key Literature & Conceptual development: 2a: What is the proposed title of your research? “Embracing Cash Flow Ratios for predicting financial future”. 2b: What general areas of research does your topic cover? Importance of Cash flows Process of analysis Drawbacks of financial ratio analysis Relevance of including cash flow ratios into financial statements 2c: What are the key readings for your research? Internet Sources Financial statements of companies Analyst opinions Part 3: Research Questions 3a: What are your research questions likely to be? How and why financial statements are failing to predict financial failure...
3 Pages(750 words)Dissertation

Cash Flows of Multinational Corporations

...? Finance and Accounting By Due Q1 I have learnt about the cash flows of multinational corporations. Apart from profit maximization, maintaining a healthy cash flow is also very important for a company and it needs very good management. The manager has a variety of internal and external tools available to delay the cash disbursements and accelerate cash receipts to maintain a good cash flow. However, these tools are required to be applied intelligently. The importance of exchange rates and their role in the working of international financial markets is also very important. The fluctuations in the forex may result in great losses. In order to get protection from such losses, there are helpful tools like futures contracts which reduce...
6 Pages(1500 words)Assignment

Statement of Cash Flows- Assignment

... ACCT500 – Financial & Management Accounting 27 November ment of Cash Flows Listed below are eight technical accounting terms introduced in this chapter:    Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the term described, or answer "None" if the statement does not correctly describe any of the terms. Debt ratio _ (a) The percentage of total assets financed by creditors. The formula for the debt ratio is total debt/total assets (BPP 2009) Return on assets _ (b) A measure of the effectiveness with which management utilizes a company's resources, regardless of how those resources are financed. The formula for the return on assets is Net income divided by total assets...
8 Pages(2000 words)Assignment

Statements of cash flows

... My Position It is important to cash equivalent as quite different from cash. Moreover, cash equivalent are not only short-term securities but they are liquid. For a case of IFRM it was considered that an investment is cash equivalent only when it has a very short term maturity of three months or fewer months from the time it was acquired. Here, borrowing is considered a financing activity and since overdrafts are borrowings for a short time, they are thus added to cash flow statement. Moreover, they are included in cash flow statement because their payment is based on demand from cash management and thus composes what is called cash and cash equivalent. This explains why bank overdrafts are not part of financing activities. Additionally...
7 Pages(1750 words)Research Paper

Reporting and Analyzing Cash Flows

...Cash Flow Analysis and Report Grade Cash Flow Report Profit Expenses Net Sales $ 348 600.00 Depreciation expense $ 25 620.00Cash Collected from sales $ 758 100.00 Other expenses $ 274 995.00 Cost of goods sold $ 409 500.00 Loss on equipment sale $ 1 470.00 Income from operations $ 46 515.00 Equipment Purchase $ 26 775.00 income tax $ 6 615.00 Net Income $ 39 900.00 Borrowed $ 4 200.00 Shares Issued $ 23 100.00 Total Expenses $ 328 860.00 Net Cash After Operations $ 86 940.00 Assets Liabilities Cash $ 95 550.00 Prepaid Expenses $ 11 970.00 Merchandise Inventory $ 318 150.00 Equipment $ 194 775.00 Common shares $ 338 100.00 Accumulated depreciation $ 76 125.00 Retained earning $ 8 505.00 Accounts payable $ 82 215.00 Long-term notes payable...
2 Pages(500 words)Assignment

Cash Flows in Business Organisations

...CASH FLOWS IN BUSINESS ORGANISATIONS Table of Contents Introduction 4 Task 4 Task 2 5 Task 3 6 a. Operating Activities 6 b. Working Capital 7 c. Financing Activities 7 d. Investment Activities 8 Task 4 8 Conclusion 9 References 10 Appendix 11 Table 1- Consolidated Income Statement of US Airways 11 Table 2- Consolidated Statement of Cash Flow of US Airways 11 Table 3- Consolidated Income Statement of United Airlines 13 Table 4- Consolidated Statement of Cash Flow of United Airlines 14 Introduction The Income Statement of a company shows the revenue earned, gross profit, operating profit and net profit for a particular period of time based on ‘accrual accounting’ concept. The true position of cash is reflected from the consolidated...
4 Pages(1000 words)Coursework

Cash Flows in Business Organisations

...Cash flows in business operations Task Table of contents Cash flows in business operations Table of contents 2 Introduction 3Reasons why net profit may differ from the net cash flow generated within a financial period 3 Direct and indirect cash flow presentation 4 Comparison of the cash flow statements of Viacom and Omnicom for the year 2011 and 2012 4 List of References 7 Appendix 1a: direct method for cash flow (XY Company) 8 Appendix 1b: indirect method of cash flow (TT Company) 8 Introduction This report seeks to shed some light on some important issues surrounding the financial statement, specifically, the cash flow statement. Included in the report are the reasons for unequal net income and net cash flow during a financial period...
4 Pages(1000 words)Coursework

What is The Cash Flows

... Case Study Question 1 i. Projected Cash flows The Cash flows are obtained by adding the cash inflow/outflow for a specific year and the depreciation value for the year. The depreciation being a non cash item is deducted in the income statement as an expense, the net cash flow is obtained by adding back the depreciation value that was charged as an expense before (Francis, 2004; Pandey, 2009; Plewa, 1995; Jury, 2012). In the mentioned case the company's policy is to depreciate the assets using the straight-line method. Cash Flow of Project Alpha Cash inflow/outflow £ Depreciation £ Cash Flows £ Initial Investment (100,000) Year 1 15,000 18,000...
15 Pages(3750 words)Essay

Statement of Cash Flows

...Importance of ment of Cash Flows Importance of ment of Cash Flows Public firms are required to prepare annual financial reports, which shows their financial positions. Among the statements that must be prepared is the statement of cash flows. Since cash is the lifeblood of any firm and is crucial to the success of any business, the statement of cash flow is a vital source of information. A cash flow statement attempts to answer how a firm used and generated cash during the fiscal period (Harrison, Horngren, & Thomas, 2013). This information is critical to users as it helps them access a particular firm’s ability to generate cash in future. Creditors can also use this statement to establish the credit worthiness of a company within...
1 Pages(250 words)Assignment

Risks and Uncertainties in Construction Projects

...Risks and uncertainties in construction projects are inevitable. Claims on construction projects involve the and the contractors. They have to be prepared for the uncertainty of the construction projects. The risks and uncertainties associated with a particular project may be specific to that project, nevertheless, the identification of major risk factors has been the subject of study in the construction industry. This essay will examine what constitutes risks and uncertainty in the construction industry and then discuss this concept from the point of view of the client and the contractor. Risk is the possibility of suffering loss or harm and the impact that risk has on the involved party (AbouRizk). The severity of risk is measured...
6 Pages(1500 words)Essay

Management Judgment of the Construction Company

...Decision Analysis for Management Judgement Analysis of the Construction Company Case study For Paul Goodwin & Prof. Rod Green By Kyriaki Thomadaki 1st November, 2006 CONTENTS 1. Introduction 4 pOLYKEM Historical background 4 1.1 Role of Decision Making 6 Case Study 7 1.2decision making concept 7 Babis Vovos Corporations 8 2. Approach of Analysis 10 2.1 Assumptions 10 Competitive thermal insulation systems 17 INTRODUCING THE CASE STUDY 1. Introduction Today companies find themselves in a continuous battle for survival. This battlefield is no longer within the region of their location as companies have competitors, customers, and suppliers around the globe. This ever competitive and changing environment raises the need for knowledge on how...
12 Pages(3000 words)Case Study

The Corrupted Cash Cow for Cops

...Police Details: The Corrupted Cash Cow for Cops English 101 Prof. E. Suffolk December 5th, 2008 Police Details: The Corrupted Cash Cow for Cops You are driving home from work. Almost home, you turn onto a side street. You know this street quite well, as you always take the same route home. A residential area, this street has little traffic and a speed limit of 30 miles per hour. As you drive, you notice the all too familiar signs of road construction. Like most people, once seeing the “construction ahead” sign, as well as the workers and big orange trucks, you step off the gas pedal and begin to slow. In 49 states of the United States, you would also see a civilian or a certified flagger. However, you do not live in those states. Rather...
8 Pages(2000 words)Assignment

Leadership: a Critical Construction

I experienced all the theories by different writers by working on them practically. While working in a group, I found out communication plays a very important role in group performance. Team working, communication and leadership, all are very important in group working and a group cannot work and perform successfully in the absence of these skills and because of these skills being poor. During my work, I found out communication, whether it is written communication, verbal communication or face-to-face communication, is very important in all its forms because it is only because of communication that we are able to deliver our messages and ideas to each other.
Leadership also plays an important role because a leader is required...
11 Pages(2750 words)Personal Statement

Free Cash Flows Theory

These are not hard and fast rules in determining the capital structure which should best affect a firms value. These theories lay down the benefits and the costs when a firm chooses what it sees as an adequate mix to maximise the shareholders value.

One of the implications where this research can lead include the possibility of the effectiveness in maximising shareholder value by employing two or more theories in capital structure decisions. Because these theories are more conditional by nature, probing which combinations when used for capital structure decisions are more effective in arriving at the goal of maximising firm value can be another subject for further research.
The role of capital structure in increasi...
11 Pages(2750 words)Case Study

Reasons for the Failure of Cash for Clunkers Program

... Reasons for the Failure of Cash for Clunkers Program Introduction The $3 billion “Cash for Clunkers” plan is being hailed in Washington as a great success because so many Americans sought to get a $3,500 to $4,500 check financed by other taxpayers in return for trading in their old car (The Wall Street Journal). But the latest reports show that the Obama program to boost the automotive industrial sector is going to be dead, not due to less popularity, but because of the huge popularity and lack of funds. In November, 2008, U.S. sales for the Toyota, Lexus and Scion brands combined fell 33.9 percent; year-to-date sales were down 13.4 percent in the United States, to about 2.1 million, according to Auto Data Corp. (Henry) Inside the 789...
7 Pages(1750 words)Term Paper

Internatioanl Construction Contract Consultants

... not allocate the loss proportionally was the crux of the issue. (Blackler 2008). Hence, in Camford University project work, I wish to advise that it is wise to follow the decision made in the City Inn case and to grant time extension to the contractor. 2. Antiquities It is better to add clauses in JCT contract as regards to contractual provision concerning with the finding antiquity objects during the course of a contract work for varied reasons. One has to be careful in regard to antiquity object as disturbance or removal of such antiquity from their original site may deteriorate their value. For instance, during the construction of a very expensive and large project in London, Shakespeare’s Globe theatre was found and this had delayed...
13 Pages(3250 words)Essay

How Are Fashion and Appearance Central to the Construction of Social Identities

...How are fashion and appearance central to the construction of social identities? As individuals, we search for our identities, we try to find our place in society, and we want to make statements about ourselves. As history has evolved, social roles have encountered a transition from a predictable and calm order to a certain tumultuous heterogeneity. Nowadays, our place in society is not necessarily predefined by our place of birth, family and social status. On the contrary, we have to search for it, earn it, and demonstrate it to the world. In other words, we have to construct a social identity- the image we give to the world about our own personality and the way others perceive us. Fashion plays a very important role in this process...
8 Pages(2000 words)Term Paper

Construction Work Hazards

...Construction work hazards s: Construction work hazards Introduction A large number of people work in the construction sector acrossthe globe. The employees are faces several challenges such as high risks, constant change of working condition, working on different project simultaneous and transfer to different projects thus high employees turnover. Construction sector also contribute to national social and economic development (Zou, 2011). The construction sites range from building small residential houses, large estates, commercial building and transport facilities among others. Construction site is one the most dangerous place for employees, supervisors and general public because of the frequency of injuries as well as fatalities (Zou...
10 Pages(2500 words)Term Paper

Building Surveying in Construction

Allow for the organization of how remained material and equipment. Ensure the overlying materials are eliminated and undertake the preamble measurements to prevent the spread of contaminations during preparations. Based on the classification of potential contamination areas, establish a reference grid. Establish scale drawing indicating premises characteristics and further make grid reference more appealing.
A surveyor starts the surveying process by reviewing the presented documents based on land use and buildings based on the legislation and codes as benchmarks. To check the performance, the surveyor plans specifications and engineering drawings with respect to medium-rise buildings that are analyzed and interpreted (Gorse,...
8 Pages(2000 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Construction of the cash flows for FREE!

Contact Us