A comprehensive summary for the course 'Financial Feasibility' in theme 8, given by mister Room, during the course Industrial Engineering & Management at the Hanze University of Applied Sciences in Groningen. I would also like to thank him for his contribution to the summary. The summary is written...
Accounting and Finance for Non-Specialists - Atrill McLaney - Tenth edition
All the calculations referenced to in the supersummary
All for this textbook (3)
Written for
Hanzehogeschool Groningen (Hanze)
Technische Bedrijfskunde
Financial Feasibility
All documents for this subject (1)
2
reviews
By: arendhendrikschonewille • 4 year ago
By: ninewg • 4 year ago
Seller
Follow
genos
Reviews received
Content preview
Financial Feasibility
Introduction
Feasible means: possible, achievable and doable.
Numbers itself are indeed boring
But numbers can tell an important story
The story will allow management to assess performance (and act accordingly)
The story will help management to make the right decisions and manage the
company professionally
Next to that, numbers are a legal obligation (annual report with Balance Sheet
and Profit/Loss Statement)
You’ll need numbers for investors and bankers
Any serious business is ‘run by the numbers’
The balance sheet shows:
The assets: what we have (coming); left side of the balance
The liabilities: how we financed what we have; what we owe to others
(suppliers, tax man, banks owners); right side of the balance
At a specific moment in time (snap shot)
How have we financed our assets? 2 ways:
Liabilities (= money we borrowed from others)
Equity (= our own money or the ‘owners share’ or ‘owners capital’ or ‘owners
claim’)
Note: equity is also liability; the company owes that money to the
owners/shareholders
Balance sheet:
, Shows how the business is financed and what we have used these funds for
Can provide a basis for assessing the value of the company
Relationships between assets and claims can be assessed
Performance can be better assessed
Income statement:
, Chapter 5 Measuring and Reporting Cash Flows
Why is cash so important?
The importance of cash lies in the fact that people will only normally accept cash in
settlement of their claims. If a business wants to employ people, it must pay them in
cash. If it wants to buy a new non-current asset, it must normally pay the seller in
cash. When businesses fail, it is the lack of cash to pay amounts owed that really
pushes them under. Cash generation is vital for businesses to survive and to be able
to take advantage of commercial opportunities. These are the things that make cash
the pre-eminent business asset. During an economic downturn, the ability to
generate cash takes on even greater importance. Banks become more cautious in
their lending and businesses with weak cash flows often find it difficult to obtain
finance.
The main features of the statement of cash flows
The statement of cash flows summarizes the inflows and outflows of cash for a
business over a period. Cash inflows and outflows falling within each other category
are added together to provide a total for that category. These total are shown on the
statement of cash flows and, when added together, reveal the net increase or
decrease in cash over the period.
The relationship between the main financial statements
The statement of cash flows is, along with the income statement and the statement of
financial position, a major financial statement. The relationship between the three
statements is shown in the figure below:
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller genos. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.21. You're not tied to anything after your purchase.
