Review the posts of your peers, and respond to at least two. For each response, address any discrepancies between your findings and your peer's. Seek clarification of any aspects of the post that are not clear to you. Provide feedback on any particular topics that could be clarified.
Student 1:
It is important to review the statement of cash flows as it reports the changes in a balance sheet for the company's income. The statement of cash flows also illustrates the changes to the income of cash and cash equivalent assets. Furthermore, it can be a key indicator that shows if a company has been gaining revenue or losing revenue. As an investor who is potentially going to buy a company as a long-term investment, I would want to know the trend of the company over the last 5-10 years.
In addition, I would also review any open accounts receivable to have a good understating of what is still owed to the company. At this point I would also review the accounts payable to get a good understanding of what the company currently owes. Being able to review and understand the two accounts will be a good starting point to evaluate if the company is too deep under to turn around of if they are currently profiting.
Lastly, it is also important to review the recent and previous sales allowances given by the company. This can be a great indicator of the company product quality and services. If a company has given lots of sales allowance discounting their prices for their product it can have a negative impact on the company.
Student 2:
Buying out the existing shares of a publicly traded company involves serious confidence. I would consider it a gamble for an uninformed or novice shareholder. Plenty of factors need to be taken into account. Most importantly, every facet of the cash flow statement is imperative with intricacies only a financial professional can spot. In other words, it is good for starters to bring in an independent team of auditors to dig deep into the cracks for any existing fallacies which may threaten the company's growth in the future. It is important to understand the relationship of the movement of funds as it in the realm of operations, investments, and financing. It is similar to a health diagnostics .
Cash flows from operating activities refer to money generated by a company's center business actions. This number focuses the firm's ability (or inability) to make a profit. While it provides good insight into whether or not the firm is making money, the other components of the cash flow statement also need to be taken into consideration in order to develop a complete picture of the company's health. It is not all about buying and selling shares or bonds, but about the money made or spent in the long term. A company takeover is an investment in itself. It is a takeover of the clients, investments, and opportunities. Afterward, the cash is measured by the relation to its creditors and owners. The whole concept is quite deep as payroll, accounts payable, and receivable is examined to determine the health of an organization. It is important to examine the turnover rates to see if the profitability generated is worth taking the risk. Understanding how many consumers are prepared to allow a price reduction on an item versus those who insist on a return is relevant knowledge. These types of transactions are called allowances and sales returns, individually, and are usually joined into a single account, which has the impact of decreasing entire sales.