Reflection Case
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Week 4 Team Reflection
During this week we learned that all companies are required to prepare a statement of cash flows. Statement of cash flows gives an accurate amount of the actual cash flow within the company. The financial statement gives a picture of how much revenue a company reports. The statement of cash flow gives external users such as lenders and investors a better idea on the decision to do business with that particular company. The statement of cash flow is broken down into three sections which are operating activities, investing activities and financing activities.
The operating activities section analyzes the companys flow of cash related to a net loss or net income. This shows the cash that the company has earned and received related to the operating activities. Now the investing activities section shows all the cash flow from all of their investments. Finally the financing activity shows all the cash flow from the financing activities. Now this refers to bank loans, borrowing from the bank, and money that was collected from selling stocks and bonds.
We also learned of some of the ratios used to analyze a companys financial information such as Liquidity Ratios, Profitability Ratios, and Solvency Ratios. There are differences in the different ratios because there are those that help determine managerial decisions each of them have a different purpose. Even though there are different ratios they are just as important as the next ratio just in different ways. There are three different parts that they play a part in such as industry average comparisons, intracompany comparisons and intercompany comparisons.
I think that our team has gotten an idea of the importance of analyzing a companys financial statements and data. Even though it may be a difficult task to measure a companys finances over a period of time it can become very helpful. There were a lot of ratios established to assist in doing certain financial statements. They help paint a clearer picture of the companys stability. This weeks reading I believe will help us understand each one of our companys annual reports, cash flow reports and income statements.