Dissertation: Analysis of Techniques for Speeding Cash Flows

Dissertation: Analysis of Techniques for Speeding Cash Flows
12/04/2011 Comments Off on Dissertation: Analysis of Techniques for Speeding Cash Flows Academic Papers on Business Studies,Sample Academic Papers admin

Chapter 1: Introduction

1.0 Background to Context

The potential of a company to generate higher earnings is quite important in today’s competitive world but the importance of cash flows and the ability to speed up cash flows is more important. The earnings of a company can be manipulated by various means as was the case with Enron and WorldCom, the two companies which declared bankruptcy in 2001 and 2002 respectively. Both of these companies manipulated earnings to cause the stock prices to increase without much consideration on the actual cash flows of the company.

The cash flow of a company depicts the actual position of a company with respect to liquidity and the inflows and outflows during a particular period of time. The speed of these cash flows is quite important as the early receipt and delayed payment of cash give a company a significant margin and time to invest this cash flow for profitable means and generate more cash flows for future operations. The three areas where cash is used or is generated includes cash from operating activities, cash from investing activities and cash from financing activities. Out of these three areas cash from operations is the most important as it is the cash flow used up or generated from operating activities. The techniques of speeding up cash flows are usually applied in the area of cash flow from operations.

The earning potential of a company is quite important but the ability to generate cash flows in a timely fashion is more important than the learning factor. The users of financial statements now emphasize more on cash flows and the timing of cash flows than the earnings of a company as cash flows reflect a more practical position of a company for a specific period of time. The future operations of a company are dependent not on its ability to generate profits but the translation of these profits into cash. As cash is the most vital asset of any organization it is quite important for the company to manage its cash flows and speed up the cash flows to operate more efficiently in the future.

There are various indicators that reflect the financial condition, position and performance of a company and its management at a specific point in time. The financial statements of a company provide these indicators as a gauge for the performance of a company and its management. Out of all these financial statements, the statement of cash flows is most important and presents the cash inflows and outflows of a company during a period of time which is usually one year. Although the profitability and position of the company with reference to its assets and liabilities are important, the statement of cash flows is given much importance due to the fact that it presents a more practical and realistic approach to the financial position of a company. The most important factor for users of financial statements of a company is the ability of a company to generate cash flows during a specific period of time.

The importance of cash flows becomes more apparent in the wake of recent financial crisis which started in 2008 due to subprime mortgages in the U.S. and spread throughout the world. The main reason for this financial crisis which caused many banks and financial institutions to go bankrupt was not the profitability of these organizations but the liquidity crunch these companies faced. The liquidity crunch is not the result of low profits or huge losses but is the aftermath of mismanagement of cash flows. The banks reported high profits but the cash inflows were not managed efficiently to cope with future operational requirements. The need for speeding up cash flows is more important now than it was before to cope with the deteriorating financial conditions throughout the world.

As the ability of a company to generate cash flows and speeding up these cash flows is quite important, the current research will study the techniques to speed up cash flows in organizations keeping the focus on retailing companies. This research will be based on a case study approach which will focus on two companies of the retailing industry. The research will focus on Marks and Spencer and Debenhams and the various departments of these companies to study and evaluate the techniques to speed up cash flows in organizations.

Please go to the order form to order essays, research papers, term papers, thesis, dissertation, case study, assignments on this essay topic.

Related Essays, Research Papers, Term Papers, Thesis, Dissertation, Case Study, Assignments entries.

...

BUY CUSTOM ESSAY

...

Tags
About The Academic Paper