Inventory and expenses : Inventory is usually the largest current asset of a business that sells products. If the inventory account is greater at the end of the period than at the start of the reporting period, the amount the business actually paid in cash for that inventory is more than what the business recorded as its cost of good sold expense. When that occurs, the accountant deducts the inventory increase from net income for determining cash flow from profit.
The prepaid expenses asset account works in much the same way as the change in inventory and accounts receivable accounts. However, changes in prepaid expenses are usually much smaller than changes in those other two asset accounts.
The beginning balance of prepaid expenses is charged to expense in the current year, but the cash was actually paid out last year. this period, the business pays cash for next period’s prepaid expenses, which affects this period’s cash flow, but doesn’t affect net income until the next period. Simple, right?
As a business grows, it needs to increase its prepaid expenses for such things as fire insurance premiums, which have to be paid in advance of the insurance coverage, and its stocks of office supplies. Increases in accounts receivable, inventory and prepaid expenses are the cash flow price a business has to pay for growth. Rarely do you find a business that can increase its sales revenue without increasing these assets.
The lagging behind effect of cash flow is the price of business growth, mentions Expert Comptable Tours . Managers and investors need to understand that increasing sales without increasing accounts receivable isn’t a realistic scenario for growth. In the real business world, you generally can’t enjoy growth in revenue without incurring additional expenses.
Investing and financing : another portion of the statement of cash flows reports the investment that the company took during the reporting year. New investments are signs of growing or upgrading the production and distribution facilities and capacity of the business. Disposing of long-term assets or divesting itself of a major part of its business can be good or bad news, depending on what’s driving those activities.
A business generally disposes of some of its fixed assets every year because they reached the end of their useful lives and will not be used any longer. These fixed assets are disposed of or sold or traded in on new fixed assets. The value of a fixed asset at the end of its useful life is called its salvage value. The proceeds from selling fixed assets are reported as a source of cash in the investing activities section of the statement of cash flows. Usually these are very small amounts.
Like individuals, companies at times have to finance its acquisitions when its internal cash flow isn’t enough to finance business growth.
Financing refers to a business raising capital from debt and quity sources, by borrowing money from banks and other sources willing to loan money to the business and by its owners putting additional money in the business. The term also includes the other side, making payments on debt and returning capital to owners. It includes cash distributions by the business from profit to its owners, explains Expert Comptable Clermont-Ferrand .
Most business borrow money for both short terms and long terms. Most cash flow statements report only the net increase or decrease in short-term debt, not the total amounts borrowed and total payments on the debt. When reporting long-term debt, however, both the total amounts and the repayments on long-term debt during a year are generally reported in the statement of cash flows. These are reported as gross figures, rather than net.
Investing and financing.
Dry Carpet Cleaning : The traditional method of cleaning carpet can become cumbersome at times. Since it requires a water source, carpet cleaning can be difficult to do. Some carpet cleaners come with tubes that have to be connected to the water faucet in order to clean the carpet. Other cleaners have to be filed with water. These can be hard to pull around the house as you clean each room. As an alternative to these methods of carpet cleaning, dry carpet cleaning can be used in order to do a quality cleaning job without as much effort, explained Carpet cleaning Bloomington IL .
No extra water source
Since dry carpet method does not require an extra water source, this is one less thing that you have to worry about. Most kinds of dry carpet cleaning require the use of some kind of shampoo or other solution to be put on the floor and allowed to sit for a period of time. After this time has expired, you simply vacuum the solution and the carpet is clean.
Another advantage of dry carpet method is that you do not have to be concerned with getting all the moisture out of the carpet. With the traditional way of carpet cleaning, mold and bacteria can develop if excess moisture is not removed from the carpet. When you clean your carpet with dry carpet cleaning, this excess moisture is not a concern.
Most people with delicate carpets are forced to have their carpets professional cleaned since the water carpet cleaning method would cause damage to the carpet. For people that have delicate carpets, carpet cleaning is an excellent alternative to having the carpet professionally cleaned.
There are many benefits to using carpet cleaning over water-based methods of carpet cleaning. Not only is dry cleaning convenient and effective, it is also less expensive for those who are forced to have their carpet professionally cleaned.