Finance and Cash Flow Analysis Essay

Ej Reed
Professor Uhr
December 4, 2013
Finance, Forecast, Budget In chapter 18, there were a lot of topics that seemed to be a very important part in a business but there were three terms that I found very interesting; finance, forecast, and budget. They all play different roles in management and each rely on each other to do their job in order to have the business running properly. With that being said, you can tell that in order to be an employee, the person will have to go through the proper training and have the proper education to take on these occupations. Finance is the allocation of assets and liabilities over time under conditions of certainty and uncertainty. A key point in finance is the time value of money, which states that a unit of currency today is worth more than the same unit of currency tomorrow. It also acquires funds for the firm and manages the funds as well. Finance activities could be a number of things like preparing budget, doing cash flow analysis, and planning for the expenditure of funds on assets like plant, equipment, and machinery. But who holds the job of managing the finances? Financial management does. Financial managers are responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization. Without a carefully calculated financial plan, a firm will have little chance of survival. They also have to examine data that is sometimes brought in by accountants. Financial managers recommend strategies for improving performance throughout the firm and can only make sound financial decisions only if they understand accounting information. They have to work in many places, including banks and insurance companies. Most financial managers work full time, and many work long hours. According to usnews.com financial management jobs tend to be high paying; median annual wages were $107,160 in 2011, with the lowest-paid 10 percent earning less than $58,120 and the highest-paid 10 percent earning more than $187,199. The highest-paid in the profession work in the metropolitan areas of New York City, San Francisco, and San Jose, Calif. Forecasts help determine the amount of inventory to be kept on hand, how much raw material should be purchased, and how much of a product should be made. Inaccurate forecasts can lead to costly inventory buildup or stock outs. Both of these events are harmful in a business world where customer service is of the utmost importance. Forecasts are mainly just different types of predictions. For example, a short-term forecast predicts the revenues, assets, and expenditures for a year or less. Long-term forecasts predict the same thing, but for more than a year, mostly between five to ten years. The business would use its past financial statements as a basis for projecting expected sales and various costs and expenses. Long-term forecasts give top management, as well as operating managers, some since of the income, or profit. The length of the forecast depends on product market changes and susceptibility to technological changes. Demand sometimes behaves in random and irregular ways. Other times it exhibits predictable behavior. Cash flows forecast will predict if your business will have enough cash to support the operations of the

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