Cash Flow Concepts
Not what you're looking for?
1. For what purposes might forecasting cash flows be an analysis tool?
2. For a pure equity firm (with no net debt), how is free cash flow disposed of?
3. Why might an analyst not put much weight on a firm's current free cash flow as an indication of future free cash flow?
4. Explain why very profitable firms sometimes have negative free cash flows.
Purchase this Solution
Solution Summary
This response provides some notes and references related to forecasting cash flow as analysis tool, and also discusses how is free cash flow disposed of in pure equity firm, and why very profitable firms sometimes have negative free cash flows.
Solution Preview
Dear Student,
Please find guidelines related to cash flows as analysis tool in the attached file.
The content below has been written to get you started on this assignment. This has been written to help you with this particular problem and its use is limited as such. The content of the solution must not therefore be passed on as your own work for grading or commercial purposes. You can also use the listed resources to explore your topic further.
Good luck with your studies.
Sincerely,
Reena (106553)
1. For what purposes might forecasting cash flows be an analysis tool?
In an organization, the cash flow is forecasted to predict the future financial position of the organization over a specific time period. The cash flow forecasting can be used as an analytical tool to analyze the financial needs of an organization (Call et al., 2013). In this concern, different reasons of forecasting cash flow are discussed as below:
• To identify the potential shortfall in organization's cash flow: Cash flow forecasting is an important tool, which can be used to identify the potential shortfall of cash in the organization. Therefore, cash flow forecasting can be used to analyze the financial needs of an organization.
• To make sure that organization is able to afford employees and suppliers: The management can forecast cash flow to analyze the capability of paying to their suppliers and employees, which is important for the organizations for an effective management (Call et al., 2013). If, the employees and suppliers are not paid timely than they will stop soon to do work for the organization.
• To make effective financial planning: In ...
Purchase this Solution
Free BrainMass Quizzes
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.