GCU ACC 502 Topic 8 DQ 1

DISCUSSION 1

What were the firm’s major sources of cash? Its major uses of cash?

The major sources of cash during the year were the accounts receivables. The accounts receivables entail the creditors of the company. During the years the company settled most of its accounts receivables that were outstanding, thus there was a major influx in the operating activities of that financial year of $160,000,000. This was the major source of cash. On the other hand, the major use of cash that was experienced was under accounts payables, (Libby et al., 2014). The company paid out an amount equivalent to $91.3 Million. This was spent in settling the company’s account receivables.

What other major items affected cashflows?

The other major item that affected the cash flows of the company was the change in inventory. The company experienced a change in inventory of $80.2 Million, this was experienced under an increase in inventory. Such increase in cash flow was experienced because the company had to get in materials (raw materials), the raw material were items that were used in the making of their products, (Boisjoly et al., 2020). These raw materials were paid for, which was a use under inventory.

3. Were the working capital accounts the major sources of cash or users of cash?

Disregarding the cash and cash equivalents, the working capital accounts was a major source of cash. This is because the company realized a decline in these accounts, which was equivalent to $80.2 Million. Such decline brought about an increase in liquidity of the company, which resulted in an increase in cash of that financial year.

References

Libby, R., Libby, P. A., Short, D. G., Kanaan, G., & Gowing, M. (2014). Financial accounting (p. 0). McGraw-Hill/Irwin.

Mian, S. L., & Smith Jr, C. W. (1992). Accounts receivable management policy: theory and evidence. The journal of finance, 47(1), 169-200.

Boisjoly, R. P., Conine Jr, T. E., & McDonald IV, M. B. (2020). Working capital management: Financial and valuation impacts. Journal of Business Research, 108, 1-8.

Al-Abass, H. S. (2018). Effect of working capital management on profitability of cement sector listed companies. International Journal of Academic Research in Accounting, Finance and Management Sciences, 8(1), 137-142.