Week One Discussion

Cash on hand and Assets are important to account for when expanding into a new product line. When an accurate balance sheet is presented and all proper accounting is done, the company is able to leverage their financial strengths and not expose weaknesses when expanding into a new product line. The reasoning for such a strong focus on the balance sheet is to ensure that the capability to expand is present financially. Companies that have cash on hand and assets are displaying a positive indicator because it shows the ability to act and invest on demand. According to (Martin, 2002) “Cash is king regarding solvency, but customers shouldn't overlook a company's cash-burn rate” what this means is that even though there is cash on hand the ability to go through it is present especially when launching a new product lines in which case the ability to replenish cash reserves must present in the form of revenues.

A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt.

The free cash flow method is used to gauge “a company’s cash flow beyond that necessary to grow at the current rate… [to ensure companies] make capital expenditures to continue to exist and to grow” (Drake, n.d.). Calculation of free cash flows utilizes various components, including a firm’s value, cash flow forecasts, a firm’s capital structure, the cost of capital, and/or discounted cash flows.

Free cash flows are the monies available for distribution to all investors after paying current expenses, taxes, and making the investments necessary for growth.

4. Did the cash flow from operations cover both the capital expenditures and the firm’s dividend payments, if any?

Analyzing a company 's operating expenses is often the most important aspect of equity analysis. How well a company generates operating cash flow dictates how well it can satisfy the claims of creditors and creates value for common shareholders. In order to assess this value creation, investors do well by analyzing a company 's operating income, operating cash flow and operating margins.

According to [Fernandez, 2002], the most important types of cash-flow are the Free cashflow (cash-flow available to satisfy both the shareholders’ and creditors’ return requirements), the Equity Cash-flow (cash-flow available for shareholders) and the Debt Cash-flow (cash-flow available for creditors). 14

In corporate finance, free cash flow (FCF) is cash flow available for distribution among all the securities holders of an organization. They include equity holders, debt holders, preferred stock holders, convertible security holders, and so on.

As shown in Exhibit 4, in order to value a company we first started by calculating the free cash flows (FCF) year by year. In order to do so, we decided to use the forecasted revenue numbers from Capital IQ and calculate all the other metrics by using the trends we saw in last three years (Exhibit 3). The company can allocate free cash flow in several ways, including but not limited to: repurchasing stock, reinvesting for growth and paying out dividends.

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 him because he refused to endorse the customer’s exaggerated profit claims.

The existing resources are the second name intended for the working or operating capital, the intensity of the existing resources as well as what aspects are employed in financing the working or operating capital strategy. The approach is planned by means of targeted agendas, that might be antagonistic or traditionalist. Beneath a traditional capital approach organizations pay closer attention to have more cash in hand so that it facilitates them to invest during shorter or longer requirements periods by means of long lasting liability. The technique is really exclusive however proposes lesser risks as well as lesser profit shares. An antagonistic approach presents the corporation’s higher risk as well as

This section reflects the underlying health of the business thus making it the most important section of the cash-flow statement. The ability of a firm to fund its operating capability, repay loans, pay dividends etc are indicated by the cah flows arising from operating activities.

Trade debts mean that money can often be tied up for as much as sic

Free cash (Athanassakos, 2009, p. 1) is the economic evaluation of a firm’s ability to maintain after tax flows of cash over time and regardless of product or service. The calculation:

Cashflow is bloodline to every business and keeps oiling it like a machine. As a rusty machine can stop functioning so can a business. Whether it is business investment, growth or dividend payment, you will need smooth cashflow management