Discussion Question 2

Please provide a new answer and Please NO hand written answers. Need to be 200 to 250 words.

In your post, choose one of the financial statements and explain how a manager would use the statement to drive financial analysis and decision-making.

I believe that the cash flow statement would allow a manager to drive financial analysis and decision-making. I say this because a cash flow statement gives a birds eye view of how a company is performing. A manager is able to take either a monthly cash flow or yearly cash flow statement and depict the inflow and outflow of cash. A cash flow statement is broken into three separate areas that will allow a manager to make the best decision for the company.

1. Operations which is a day to day snapshot of cash collected (like an income sheet) but it also allows you to track inventory status such as how much or how little stock is being rotated in specific areas.

2. Investing which is the sale or acquisition of PPE. This could give a manager a snap shot of the companys growth or decrease in activity. If the company is purchasing new equipment to replace depreciated equipment or selling off items that are no longer required.

3. Financing allows a manager to see what type of loans there are and how they are being paid. Also, this allows a manger to see the complete transaction of liabilities that the company has.

Another area that the cash flow assists in is for a manager to visualize if the company is able to pay for unexpected expenditures or mishaps within the company rather than taking out a loan to increase its liabilities. Banks and investors rely heavily on the cash flow statement when looking to invest or assist with the company. They utilize the cash flow statement to see if a business is able to pay off its current and non-current liabilities to eventually determine the liquidity of a business.