“Follow the money”—William Goldman, All the President 's Men
Imagine you were John Olson. You are an energy analyst for Merrill Lynch. Your boss, Donald Sanders, shows you a hand-written note from one of Merrill’s largest customers. It reads in part, ' 'Don -- John Olson has been wrong about … (our company) … for over 10 years and is still wrong … Ken. ' ' Merrill subsequently fired Olson because he refused to endorse the customer’s exaggerated profit claims.
The Ken, of course, is Ken Lay of Enron fame; the analyst was John Olson, by his own description an old-fashioned analyst who refused merely to promote stocks, relying instead on fundamental analysis to assess the companies he examined.
Ironically, he was the only analyst who used Enron’s Cash Flow Activities to correctly identify the scam. Using Cash Flow Analysis, he determined the firm had few tangible assets and generated sham profits spawned by contrived financial flimflam generated by hundreds of off-balance sheet entities.
Visualize Enron as a major client owing you a significant chunk of money in Receivables. Where would you be if you had wholeheartedly endorsed Enron like Henry Blodgett of Merrill Lynch and Mary Meeker of Morgan Stanley did?
This is why we will focus our discussion of accounting on cash flow analysis as the key to understanding solvency, both your customers and your own and not a broader overview of the Accounting process. I assume all students studied Accounting during their academic career. For those needing a refresher in accounting basics, please visit Accountingverse for detailed information.
Why cash Flow?
We like cash flow because it permits us to “follow the money” rather than the accrual-based numbers favored by Wall Str...
... middle of paper ...
...-time employees to contract work, transferring your labor costs from fixed to variable expenses. You would save money on payroll taxes and benefits, provide yourself flexibility in hiring and your ability to respond to changing market conditions, conserving cash flow. Shifting equipment expenditures from purchase to lease can also deliver cash savings.
To increase cash flow, sell subscription services with automated monthly credit card billing and offer discounts for annual plans to generate cash in advance.
Customer billing is difficult for small businesses. You can automate your billing to reduce the time it takes your customers to pay. Make a promotional offer with an expiration date limiting the number offered to generate cash up front.
Individual Analysis: Using the materials provided create 3 years Income Statement, Balance Sheet, and Statement of Cash Flows.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Managing cash flow is an important task entrusted to the finance staff rather than to the accounting department because the goal of the financial staff is to forecast the future performance of a firm. Whereas, the goal of the accounting department is to monitor day to day accounting operations and post transactions that have already occurred. Thus, accountants prepare accounting records and financial staff uses those records to efficiently manage the firm’s assets and liabilities based on the existing information.... [tags: Net present value, Investment, Finance]
724 words (2.1 pages)
- John R. Cash was an American singer-songwriter, guitarist, actor, and author. He is widely considered one of the most influential popular musicians of the 20th century and is one of the best-selling music artists of all time, having sold more than 90 million records worldwide. Although primarily remembered as a country music icon, his genre-spanning songs and sound embraced rock and roll, rockabilly, blues, folk, and gospel. This crossover appeal won Cash the rare honor of multiple inductions in the Country Music, Rock and Roll, and Gospel Music Halls of Fame.... [tags: Johnny Cash, Elvis Presley, Jerry Lee Lewis]
1103 words (3.2 pages)
- The study makes use of the financial data on Pakistani listed firms for 2001-2008 to look at the objective behind distribution of cash dividends. Based on the analysis it is found that poorly performing firms listed on Karachi Stock Market (KSE) having larger portion of non-tradable shares pay cash dividends. Because the holders of non-tradable shares (directors and block-holders) do not/cannot realize capital gains from positive change in the price of their holdings. The study finds that cash dividend distribution behavior of the poorly-performing firms is subjected to what the directors and block-holders prefer.... [tags: Business, Stocks, Cash Dividends]
2440 words (7 pages)
- Introduction SAJ Solutions focuses on the major cash flow issues within the business and provides an absolute Solution that perfectly fits to solve the issue. Here are some major reasons for the financial issues in the business: Increased competition Smaller pool of clients Loss of major contract or client Increased operating cost Major changes in industry Legal disputes with partners Force majeure (Natural Disasters) Various accidents Departure of important staff members Therefore, here are the issues described in detail: Not Enough Cash Flow Cash flow is calculated by subtracting total expenses from total income.... [tags: Cash flow, Money, Small business, Debt]
2186 words (6.2 pages)
- Discounted Cash Flow Valuation Today financial corporate managers are continually asking, “What will today’s investment look like for the future health of the company. Should financial decisions be put on hold until the markets become stronger. Is it more profitable to act now to better position the company’s market share?” These are all questions that could be clearly answered if the managers had a magical financial crystal ball. In lieu of the crystal ball, managers have a way of calculating the financial risks with some certainty to better predict positive financial investment outcomes through the discounted cash flow valuation (DCF).... [tags: Net present value, Discounted cash flow]
1554 words (4.4 pages)
- Johnny Cash is easily one of the most recognizable figures, not only in country music, but also in American culture. His story has been recounted in numerous books and movies, and his life and legacy have continued to live on long after his death. Cash’s life and career took many twists and turns from his earliest exposure to music, to his rise to fame, and his lasting influence on society and music. Cash remains a pervasive figure in the history of music. Johnny Cash was born “J. R. Cash” in Kingsland, Arkansas on February 26, 1932.... [tags: Johnny Cash, Country music, Elvis Presley]
1143 words (3.3 pages)
- Johnny Cash was born February 26, 1932. His parents called him J.R. because they couldn’t settle on the name of John or Ray so they called him JR. His father was a poor farmer who moved the family several times while Johnny Cash was a child. This made for a lot of instability in his younger years. His father farmed and when the farms were not doing so well in the beginning of the 30’s his father packed his family up and moved them to Dyess County in northeastern Arkansas. There was government assistance there to be had.... [tags: Musicians]
1263 words (3.6 pages)
- 1. Write a two-page paper on Johnny Cash. Why do you think he became so popular? Johnny Cash was a popular guitarist, author, singer-songwriter in America. He was born in February 26, 1932. Johnny Cash also grew up in the family have 7 children. After his family moved to Dyes Colony in northeast Arkansas. When Johnny Cash was a little kid, him and his sibling worked in his parent’s farm to helped them out with the cotton and seasonal crop. Johnny Cash’s intelligence of music must be developed by his family background.... [tags: Country music, Grand Ole Opry, Johnny Cash]
1955 words (5.6 pages)
- Internal cash control is very important to any business. Without effective methods in place to ensure that funds and resources are being used in an ethical and efficient way, a company may lose money or run into many other problems. Through proper establishment of responsibly, segregation of duties, document procedures, and security measures, any company should be able to maintain their funds and feel confident that their employees are producing accurate and ethical results. In the exercise detailing the cash disbursement within Idaho Company one could find some major weaknesses.... [tags: Business Management Strategy Cash Control]
1013 words (2.9 pages)
- Consider the compact of co-responsibility between the government and recipients. What is needed to make the compact work. Progresa had the goal of increasing the basic capabilities of extremely poor people in rural Mexico (Levine, 2007, p.67). Progresa is a program developed by the government of Mexico in 1997, and was implemented by President Ernesto Zedillo. With the help of Santiago Levy who was an economist, Progresa was developed to help break the cycle of poverty in Mexico. In order for the compact to work between the government and the recipients, a change had to take place from the governments’ standpoint.... [tags: Mexican Government, The Cash Program]
1197 words (3.4 pages)