Evaluating Profit and Cash Flows
Any manager’s job is to help the firm maximize its value, which is based on future cash flows. In order to understand future cash flows, informed managers must study their firm’s financial statements. You studied various profit and cash flow concepts in your accounting course. With this knowledge, you developed a good feel for how well a company was doing historically. Your focus in this course is to develop capabilities in interpretation and use of these concepts. No matter what role you fulfill in the organization (e.g., marketing analyst, accounting manager, operations director, etc.), your knowledge of how to use financial data will enable you to provide good estimates of the impacts of future managerial decisions on improving the firm’s profitability and cash flow enhancement.
To prepare for this Discussion, think about your organization or an organization with which you are familiar. Consider the importance of accounting profit, operating cash flow, net cash flow, and free cash flow for informing how the organization operates with regard to decision making. Also, consider how financial markets can affect future cash flows.
Note: If you are not in the position where you are involved in forecasting cash flows and profitability, interview either someone in your organization or a professional outside of your organization who can provide you with this information. In your post, be sure to identify the position held by this person.
Post by Day 5: