Accounting Fundamentals
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1. Businesses generate sales which may be paid for in cash or, more typically, on credit. Few companies operate in such a way that they incur no expenses prior to the sale of their goods and services, and cash is needed to fund those activities. If a company is not able to control its cash flow, it can have difficulty meeting its operational needs as well as the needs of stockholders (since dividends require cash funding) and the needs of income taxes (which are also paid in cash). In this way, highly profitable companies which do not have an adequate cash flow management system can develop operational problems severe enough to cause them difficulty.Before the first product is manufactured, there is an infusion of cash into a company in order to get it started. This cash is used to fund facility costs and to obtain the necessary raw materials and equipment necessary to conduct business. Once goods are produced, the finished products are moved into inventory and they are sold and shipped to customers. Customers pay invoices once they receive goods (some customers may have arrangements where cash is paid in some percentage prior to shipment; other customers may pay within 30 or 60 days) and the cash comes back into the business. The company also uses cash to pay interest on loans, to pay taxes on profits, and to pay dividends (if any) to shareholders. Any cash left over at this point is put back into the company and used to fund additional act
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Approximate Word count = 1156
Approximate Pages = 5 (250 words per page)
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