Construction of the cash flows Essay Example | Topics and Well Written Essays - 1000 words

Construction of the coin flows - Essay ExampleThe users of the financial statements ar very interested to learn how the business generates and uses it bills and cash equivalents during a particular period. Thus, the statement of cash flows is very important because the company wants to control the timing of the receipt and disbursement of cash. For, the company needs cash inflows to pay the budgeted and maturing cash outflows such as payables. The cash flow statement clearly shows the company managements efficacy to juggle the incoming and outgoing of funds.Also, cash inflows from in operation(p) activities are defined as those coming from it revenue generating activities. In our case, the airline just the tickets are bought because they need to visit the different revenue generating shops in different separate of the United States.Capital Budgeting (Maher, 1997 279-20) involves deciding which long term investment to undertake and how they are financed. Examples are buildings , land, grind site, factory equipment and others. Furthermore, an item is capitalized, meaning recorded as building, equipment, factory and others, if they are tangible assets held by the enterprise for use of production of goods for sale and rendering services. And, the asset bought will be used over a period of more than one category. Thus, the airline tickets only when benefit the day or the current story period when the flight was taken. Thus, the airline tickets do not fall under capital expenditures but only operating expenses. In the construction of the cash flows associated with the commercial airline contract option, should the analyst include the bonny live of business class tickets Yes, because the average cost of business class tickets involves cash flow or cash disbursement or cash payment. As discussed above in the conjecture of accounts it is part of operating expenses in the cash flow statement.Appendix A shows that for an annual average of 48 annual trips co nsisting of 4 travelers per trip at $1,000 per round trip ticket, the annual cost for this specific social class is $192,000. Also, for the following year at 50 trips at 4 persons per trip the total cost for that year in call of plant tickets is $200,000. the continues the computation until the year reaches 79 flights in 1 year at 4 persons per year totaling $316,000. QUESTIONIn construction of the cash flows associated with the commercial airline contract option, should the analyst include the cost of upgrading a business class fare to a first class ticket yes, for the same footing above. The average cost of upgrading a business class ticket to a first class ticket involves cash flow or cash disbursement or cash payment. As discussed in the theory of accounts, it is part of operating expenses of the company to support its day to day operational managementAppendix B below shows that for the year when there are 48 airline travels consisting of 4 persons per trip, the first class t icket at $1,300 per ticket will increase the ticket cost on this particular year to $249,600. This is $57,600 larger than the computation of ticket at costs in Appendix A below. Also, for the year when 50 flights with 4 persons at $1,300 first class, the total airline ticket costs for that year is $260,000 which is higher than the above information by where the business class total cost for the year is only $200,000.