Cash Flow Statement

[Buharrr]

Can someone please help me with the following question... thanks

Jones suggests that there are ways by which a business could use a Cash Flow Statement to improve the performance of her business. Identify THREE ways this could occur.

[Buharrr]

Also, I have two other question to do with the same topic.

1. Kaye is worried that her business has a negative cash flow from investing activities for the year. Explain how this in fact could be beneficial for the business.
2. Explain how the taking out of a loan could have a positive effect on the financial stability of the business.

thanks!

[naved_s9994]

Can someone please help me with the following question... thanks

Jones suggests that there are ways by which a business could use a Cash Flow Statement to improve the performance of her business. Identify THREE ways this could occur.

This isn't a Unit 3 Exam question, more like a Unit 4.
Nonetheless, you would have to discuss along the lines, on how Cash Flow Statement, shows if the firm is generating enough cash from Operating to meet its Investing and Financing requirements.

[naved_s9994]

Also, I have two other question to do with the same topic.

1. Kaye is worried that her business has a negative cash flow from investing activities for the year. Explain how this in fact could be beneficial for the business.
2. Explain how the taking out of a loan could have a positive effect on the financial stability of the business.

thanks!

1. Okay, Kaye, no need to worry.
    Look, having a NEGATIVE cash flow is not a bad thing. Having a negative Investing, means there has been some
    purchases of NCA's. Hence, the NCA's (eg. Vehicle) could be used to generate revenue in the future, keeping a
    future economic benifet, itself!
2. Ill think, then edit my post.

[Akirus]

Can someone please help me with the following question... thanks

Jones suggests that there are ways by which a business could use a Cash Flow Statement to improve the performance of her business. Identify THREE ways this could occur.

Too lazy to go into detail, but:

1. Confirm past evaluations and compare reports to assess performance relating to cash (eg. comparing with cash budgets, other entities, etc etc)

a) What the other guy said. Determining whether the day-to-day trading activities are sufficient to meet investing and financing needs.

b) Identifying areas responsible for poor performance/good performance

2. Forming predictions pertaining to the future activities of the business (i.e. preparing a cash budget), etc.

... and the list goes on, although they will most fall into one of those two categories.

[mba]

2. Explain how the taking out of a loan could have a positive effect on the financial stability of the business.

A strange question, but I would talk about how the loan could be used to purchase assets that generate increased future economic benefit for the entity.
 I.e.: the purchase of a machinery and equipment may allow the entity to produce more stock therefore increasing sales, thus increasing revenue and net profit.

[Akirus]

Taking out a loan will assist in short-term liquidity issues, improves ROE (return on owner's equity, although that's a unit 4 thing) as a result of increased gearing (i.e. debts to total assets, or in other words the ratio of liabilities to owner's equity; uni concept, don't worry about it), etc etc... That said, I would say that taking out a loan actually decreases the stability: higher gearing => greater risk.