Accounting courses in Chandigarh

Management Accounts Access to regular management information is crucial to the successful operation of your business. You can react to information in a proactive manner if it is provided on a timely basis. The frequency of the information required can be determined by you i.e. monthly, quarterly, or half yearly, whichever meets your business needs effectively. Every business reaches a point where the owner/managers’ time needs to be focused on development and growth. To enable this they need up-to-date and accurate information on cash flow, margins and profitability

Computing cash flows Cash flows are either receipts (ie cash inflows and so are represented as a positive number in a statement of cash flows) or payments (ie cash out flows and so are represented as a negative number using brackets in a statement of cash flows). Cash flows are usually calculated as a missing figure. For example, when the opening balance of an asset, liability or equity item is reconciled to its closing balance using information from the statement of profit or loss and/or additional notes, the balancing figure is usually the cash flow. Common cash flow calculations include the tax paid, which is an operating activity cash out flow, the payment to buy property plant and equipment (PPE) which is an investing activity cash out flow and dividends paid, which is a financing activity cash out flow. The following examples illustrate all three of these examples.

What is Cash Flow ? Cash flow is the money that comes in and goes out of a company. It is the generation of income and the payment of expenses. Cash inflows result from either the generation of revenue through the selling of goods and services, money borrowed, or money earned through investments. If more cash is coming into the company than leaving the company, you are experiencing positive cash flow. But if more cash is leaving the company than coming into the company, then you are experiencing negative cash flow. Keep in mind that just because you are experiencing negative cash flow for the moment doesn't mean you are going to suffer a loss, because cash flow is dynamic. Cash flow is reported on the company's cash flow statement, which is also called a statement of cash receipts and disbursements.

Formulas Accountants calculate cash flow in different ways for different purposes. In this lesson, we'll look at a few of the methods. Free cash flow (FCF) measures how much cash you generate after taking into account capital expenditures for such things as buildings, equipment, and machinery. The formula is: FCF = Operating Cash Flow - Capital Expenditures

You can usually find the information necessary to perform this calculation on your cash flow statement. Let's look at an example. Let's say that your company earned $12,000,000 in revenue last year. When you add up all the capital expenses paid for your factory, equipment, and machinery, it totals $4,000,000. Now, let's figure out the FCF: FCF = Operating Cash Flow - Capital Expenditures FCF = $12,000,000 - $4,000,000 FCF = $8,000,000 You should note that if the number derived from the equation was negative, it means that you had negative cash flow. In other words, more money was spent on capital expenditures than was generated by operations.

Operating cash flow Operating cash flow (OCF) is the measure of your company's ability to generate positive cash flow from its core business activities. Here's the formula: OCF = Earnings before Interest and Taxes + Depreciation + Amortization - Taxes Let's take a closer look at the equation. Earnings before interest and taxes (EBIT) is the revenue left over after subtracting the cost of production, selling, general expenses, and administrative expenses. It's a measure of your operating profit before interest and taxes are deducted. Depreciation is an accounting practice where you deduct the cost of a tangible capital asset, such as machinery or real estate, over a period of time, while amortization is where you deduct the cost of an intangible capital asset, such as a patent, over a period of time.

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