Business Letter

Prepare a business letter to share your advice with the CFO of a company. You will explain complex financial data and discuss the cause and effect of select accounting transactions on cash balances.

Read the fictional scenario and respond to the checklist items.

Scenario:

The chief financial officer (CFO), Karl Richland, of Semtell Company in Cincinnati, Ohio, is asking for your advice. The CFO explains sales are increasing but there is a constant matter of not having enough cash to meet payroll or pay vendors within 30 days.

Checklist: Using the information contained in the companys cash flow statement, prepare an informational business letter to the CFO to explain:

1. Why cash can go down even when sales are up.
2. How increases in accounts receivables and inventory balances affect cash flows within a company.
3. What effect increases or decreases in asset and liability accounts have on cash flow.
4. How changes in accounts payable balances impact cash flows.
5. Recommend a possible solution for the companys shortage of working capital.
6. Your informational business letter should:
   • Use the accepted business letter format and example as provided above.
   • Utilize Standard English and use correct spelling and grammar.
   • Provide a clearly established and sustained viewpoint and purpose.
   • The writing should be well ordered, logical, and unified, as well as original and insightful.

7. Your business letter must be written in a minimum of 2 pages, single-spaced, using current APA formatting.

XYZ Bank told Bob to increase cash to $70,000 from 2016 to 2017. But cash increased from $16,566 in 2016 to just $33,411 in 2017, well short of $70,000. In this assignment, you will review six select changes in the Balance Sheet accounts, highlighted in yellow, to better understand how these individual account changes impact overall cash flows. 2017 and 2016 Comparative ASSETS 2017 2016 Needed to foot the Cash Flow Statement all the way back to 2017 cash position. Net Income $3,155,848 Depreciation 212,366 Dividends Paid 2,966,412 Tax 225,700 Items 1 to 6. Note the $ value effect on Cash. Did the change in balances from one year to the next create (+) or 'use' (-) cash? Note the accounting or finance issue related to each of the six accounts reviewed. Cash $ $ 33,411 S $ 16,566 Accounts Receivable $ 260,205 $ 318,768 Inventory S 423,819 $ 352,740 71,079 S Other current assets Total Current Assets 41,251 758,686 $ $ 29,912 $ 717,986 $ (11,339) (40,700) $ Plant Property and Equipment 1,512,675 1.403.220 109,455 Goodwill and other assets Total Assets $ $ 382,145 2.653.506 $ $ 412.565 $ 2.533.771 30,420 (119,735) LIABILITIES AND EQUITY Accounts Payable S 378,236 $ 332,004 46,232 Wages Payable Accrued income taxes Total Current Liabilities S 14.487 $ 21,125 $ $ 413,848 $ 7.862 $ 16,815 $ $ $ 356,681 $ 6,625 4,310 57,167 Long-Term Debt: Bank Notes S 679.981 s 793,575 (113,534) S $ Total Liabilities Total Common Equity Total Liabilities and Equity 1,093,829 1,559,677 2,653,506 $ 1,150,196 1,383,575 2.533,771 (56,367) 176,102 119,735 $ XYZ Bank told Bob to increase cash to $70,000 from 2016 to 2017. But cash increased from $16,566 in 2016 to just $33,411 in 2017, well short of $70,000. In this assignment, you will review six select changes in the Balance Sheet accounts, highlighted in yellow, to better understand how these individual account changes impact overall cash flows. 2017 and 2016 Comparative ASSETS 2017 2016 Needed to foot the Cash Flow Statement all the way back to 2017 cash position. Net Income $3,155,848 Depreciation 212,366 Dividends Paid 2,966,412 Tax 225,700 Items 1 to 6. Note the $ value effect on Cash. Did the change in balances from one year to the next create (+) or 'use' (-) cash? Note the accounting or finance issue related to each of the six accounts reviewed. Cash $ $ 33,411 S $ 16,566 Accounts Receivable $ 260,205 $ 318,768 Inventory S 423,819 $ 352,740 71,079 S Other current assets Total Current Assets 41,251 758,686 $ $ 29,912 $ 717,986 $ (11,339) (40,700) $ Plant Property and Equipment 1,512,675 1.403.220 109,455 Goodwill and other assets Total Assets $ $ 382,145 2.653.506 $ $ 412.565 $ 2.533.771 30,420 (119,735) LIABILITIES AND EQUITY Accounts Payable S 378,236 $ 332,004 46,232 Wages Payable Accrued income taxes Total Current Liabilities S 14.487 $ 21,125 $ $ 413,848 $ 7.862 $ 16,815 $ $ $ 356,681 $ 6,625 4,310 57,167 Long-Term Debt: Bank Notes S 679.981 s 793,575 (113,534) S $ Total Liabilities Total Common Equity Total Liabilities and Equity 1,093,829 1,559,677 2,653,506 $ 1,150,196 1,383,575 2.533,771 (56,367) 176,102 119,735 $