2-2 Journal: Financial Statements and Cash Flow Management PDF

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Running Head: 2-2 JOURNAL: FINANCIAL STATEMENTS AND CASH FLOW MANAGEMENT FIN 320

Principles of Finance Southern New Hampshire University 2-2 Journal: Financial Statements and Cash Flow Management By: Beth Proulx

Running Head: 2-2 JOURNAL: FINANCIAL STATEMENTS AND CASH FLOW MANAGEMENT FIN 320

I have chosen Johnson & Johnson for this project. In 1886 it was founded by three brothers. The article called A History of Johnson & Johnson states “the Johnson brothers were inspired to start the business in order to create a lone of ready to use surgical dressings, after hearing a speech by an antiseptic advocate.” Johnson & Johnson now to this day has a wide variety of products which include: medical devices, health products and pharmaceutical products. Some of the brands you may be familiar with are: Band-Aid, Benadryl, Aveeno and listerine. Financial Statement Role Financial statements are extremely important for any business. “A firms financial statements provide a visual representation of the firm that is used to describing the business to investors and others outside of the firm as well as to the firms employees” (Titman, Keown & Martin, 2017). Financial statements include the income statement, balance sheet, cash flow statement and share holders equity statement. All of these will help the business with financial health. You can look at the debt the organization has comparative to equity. The income statement has information about the revenues earned, expenses incurred, and the profit over a specific time (Titman, Keown & Martin, 2017). It also shows how much income is growing over time and what the gross profit margin for items sold is. The balance sheet shows the company's assets, liabilities, and stockholders' equity. The cash flow statement shows how much money is coming in and going out over a period of time. The cash flow also reveals how much money the company has and where it comes from.

Running Head: 2-2 JOURNAL: FINANCIAL STATEMENTS AND CASH FLOW MANAGEMENT FIN 320

“Detailed account of activities in the firm’s common and preferred stock accounts and its retained earnings account and of the changes to shareholders’ equity that does not appear in the income statement” (Titman, Keown & Martin, 2017). Cash Flow Management Cash flow management is important because you want to be sure the business is not over spending. Cash flow is something that should be monitored by management on a daily basis. Its important to plan projections for each month as well. This will help the business see any issues ahead of time. But realizing that these are just educated guesses that balance factors such as payments, expenditures, etc. (How to Better Manage Your Cash Flow, 2003). You also need to note the upcoming amounts and dates of cash disbursements. The company I chose to research is Sears. I have always shopped at Sears for various things. The company filed for bankruptcy in 2018. At that time Sears had10,985,000 in liabilities. Some of it was from a debt load from leveraged buyout by a private organization. This left Sears with tons of money in interest to pay. Sears’ last profitable year was in 2010. A thinning cash flow has left little money to put back into the company itself, letting it become more irrelevant.

Running Head: 2-2 JOURNAL: FINANCIAL STATEMENTS AND CASH FLOW MANAGEMENT FIN 320

Income Statement

Balance Sheet

Running Head: 2-2 JOURNAL: FINANCIAL STATEMENTS AND CASH FLOW MANAGEMENT FIN 320

Running Head: 2-2 JOURNAL: FINANCIAL STATEMENTS AND CASH FLOW MANAGEMENT FIN 320

References: https://www.cnbc.com/2018/10/15/sears-files-for-bankruptcy.html Titman, S., Keown, A., & Martin, J. (2017). Financial Management: Principles and Applications (13th ed.). Pearson....