Holmes Institute HI5020: Issues in Cash Flow Statement Analysis

This report presents an analysis of corporate accounting, specifically focusing on cash flow statements. It begins with an introduction to corporate accounting and the importance of financial statements, including both income and cash flow statements, for investors. The report highlights the usefulness of these statements in assessing profitability and liquidity, key factors for investment decisions. It then details an assessment of cash flow statements for three companies: BHP, Santos, and Funtastic Ltd., examining key elements such as cash sources, trends in cash flow from operations, and overall financial strength. The analysis leads to a recommendation regarding lending based on the financial performance of these companies. The report concludes by summarizing the findings and emphasizing the significance of cash flow and income statements in making informed financial decisions. References to relevant literature are also included.

Corporate
Accounting

Table of contents
• Introduction
• Content of the income and cash flow statement
• Usefulness of information for investors
• Assessment of cash flow statement of companies
• Evaluation of financial strength of companies
• Recommendation regarding lending
• Conclusion
• References

Introduction
Corporate accounting could be defined as the process of analysing
financial data of companies which is recorded in the final accounts so
that the actual position and performance of company could be
determined. If the business entities will not be formulating financial
statements properly then it may leave negative impact upon mind set of
stakeholders because it will create difficulty for them to analyse actual
position of business.

Content of income
statement and cash flow
Cash flow and income statements are two different statements that are
used by investors for evaluating actual position of business. With the help
of both of them they can determine that the business will be able to
provide them appropriate returns on the investments that are made by
them within the company. The information which is covered by them is
related to incomes, expenses, gains, losses, cash transactions, profitability
liquidity etc.

Usefulness of statements
for investors
Income and cash flow statement are useful for investors as the key elements
that are focused by them while making investment in an organisation are
profitability and liquidity. Detailed information of both of them could be
gathered by assessing the final accounts. If an organisation will not be able to
keep detailed information in the statements then it will be very difficult for it to
attract large number of investors. Apart from this, investors can also determine
the potential rate of return which could be generated by them on the
investments.

Assessment of cash flow
statement of companies
Cash flow statement is mainly used to record information of cash transactions.
There are three different companies whose cash flow statement is analysed for
determining liquid strength. These are BHP, Santos and Funtastic Ltd. Different
elements in context of these companies are analysed during the completion of
project. These are the major sources and uses of cash, trends in cash flow from
operations, ability of the firms to generate enough cash, cash flow from
operation covering any dividend payment, the major items that affected cash
flow etc.

Evaluation of financial
strength of companies
From the cash flow statement of the BHP Ltd it has been analysed that the
enterprise is very strong as it is having fluctuating trend in the cash flow
from operations. The cash flow statement of the Santos is showing that the
financial strength of the enterprise is good as the closing balance of the
statement was showing positive results. The cash flow statement of the
Funtastic is showing that the enterprise is financially strong as its closing
balance of cash is positive for all the years that are 2017 to 2019.

Recommendation
regarding lending
By analysing the financial strength as well as performance of BHP,
Santos and Funtastic it has been analysed that the company which is
highly sustainable and string in finance point of view is BHP. If an
entity or the investors will be willing to invest in one of them then it
should make investment in BHP Ltd as the cash balance of it for three
years that are 2017, 2018 and 2019 was very high as compared to rest
of the two companies.

Conclusion
This presentation concludes findings of corporate accounting
project. It provides insight into the actual position of the
companies that are selected for analysis purpose. While planning
to lend funding a company different aspects from cash flow as
well as income statement are analysed. Some of them are profits,
dividend, incomes, working capital etc.

References
Natu, P. R., 2019. Impact of Block-chain Technology on Accounting
and Finance. Journal of the Gujarat Research Society. 21(16). pp.119-
123.
Thomson, J., 2017. Is the Accounting Profession Committed to Closing
the Skills Gap?. The CPA Journal. 87(9). pp.16-17.

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