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Finance Questions

1. Published financial statements are historical. If so, how can they be used to forecast the future?

2. Discuss the interlocking connections among the three primary financial statements and explain why conventional reporting of financial information does not provide complete information upon which financial decisions can be made.

3. The cash flow summary tells the financial manager about the differences between the cash inflows, cash outflows, and the reasons these flows have happened.
a. What does the cash flow report not tell the financial managers, investors, lenders, and other stakeholders?
b. How could this information affect these stakeholders and their participation in the financing of the organization?
c. What do you think a dot.com cash flow statement would have shown or indicated to potential investors?

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1. Published financial statements are historical. If so, how can they be used to forecast the future?
? The historical statements are important to make a financial forecast.
? For instance a person can start with the sales forecast based on historical sales and the sales expectations.
? Then the person can decide the extent of credit he will extent to customers, the inventory in hand to sell, how much inventory will be purchased, what will be the ending inventory and what will be the production costs.
? Similarly the person can forecast the cost ti will incur for production, the payments that will be made to the materials supplier and the units in the ending inventory.
? The cost of goods sold can be forecast from the above facts.
? After estimating the overhead costs based on historical costs, the projected income statement and the balance sheets can be generated. In this manner historical information is used to make forecast and projections.
? In fact without the historical information it is very difficult to make reliable forecasts.
? This problem is seen in case of newly started businesses.
? The historical statements are used as a basis for making forecasts.

2. Discuss the interlocking connections among the three primary ...

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