Cash and Carry

Examples of Cash and Carry in the following topics:

• America's Growing Involvement in WWII

  • Cash and carry was a policy requested by U.S.
  • The 1939 cash and carry legislation was designed to replace the Neutrality Act of 1937, which had lapsed in May of 1939.
  • In the "cash and carry" provision, the President was allowed to permit the sale of materials and supplies to countries at war in Europe, so long as the recipients arranged for the transport and paid immediately in cash.
  • Britain had been paying for its war equipment in gold under "cash and carry," as required by the U.S.
  • Describe how the "cash and carry" policy, the Destroyers for Bases Agreement, and the Lend-Lease Act all contributed to U.S. involvement in World War II.

• Unearned and Deferred Revenues

  • A deferred revenue is recognized when cash is received upfront for a product before delivery or for a service before rendering.
  • If the deferred item relates to an expense (cash has been paid out), it is carried as an asset on the balance sheet.
  • If the deferred item relates to revenue (cash has been received), it is carried as a liability.
  • In these cases, the earnings process is not complete when the cash is received, so the cash is recorded as a liability for the products or services that are due to the buyer .
  • A deferred revenue item involves cash received before the earnings process is complete.

• Day-to-Day Needs

  • Operating cash flow refers to the daily cash inflows and outflows generated from business revenues earned, excluding certain costs.
  • Business operations have daily cash inflows and outflows.
  • Cash outflows occur due to cash payment of business expenses, purchase of assets, and payment on debt .
  • "Cash and cash equivalents" on the balance sheet are the most liquid assets found on this statement.
  • Cash and cash equivalents are also used in the contexts of payments and payment transactions and refer to currency, money orders, paper checks, and stored value products, such as gift certificates and gift cards.

• Introduction to the Statement of Cash Flows

  • The cash flow statement provides information on a firm's liquidity and solvency.
  • The money coming into the business is called cash inflow, and money going out from the business is called cash outflow.
  • The statement of cash flows is cash based and it shows the actual inflows and outflows of cash for the given month.
  • The cash flow statement includes only inflows and outflows of cash and cash equivalents.
  • The statement of cash flows excludes transactions that do not directly affect cash receipts and payments.

• Defining the Cash Flow Cycle

  • The cash conversion cycle refers to the time frame between a firm's cash disbursement and cash collection.
  • Disbursing cash to satisfy the accounts payable created by purchase of inventory; and
  • The CCC must be calculated by tracing a change in cash through its effect upon receivables, inventory, payables, and finally back to cash, thus, the term cash conversion cycle, and the observation that these four accounts "articulate" with one another.
  • For a cash-only firm, the equation would only need data from sales operations (e.g., changes in inventory), because disbursing cash would be directly measurable as purchase of inventory, and collecting cash would be directly measurable as sale of inventory.
  • However, for a firm that buys and sells on account, Increases and decreases in inventory do not occasion cash flows but accounting vehicles (receivables and payables, respectively); increases and decreases in cash will remove these accounting vehicles (receivables and payables, respectively) from the books.

• Cash Flow Factors

  • Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.
  • A business's Statement of Cash Flows illustrates it's calculated net cash flow.
  • Investment cash flows: Cash received from the sale of long-life assets or spent on capital expenditure, such as, investments, acquisitions, and long-life assets.
  • Financing cash flows: Cash received from the issue of debt and equity, or paid out as dividends, share repurchases or debt repayments.
  • The cash flows into and out of projects are used as inputs in financial models, such as internal rate of return and net present value.

• Reporting Cash

  • Cash and cash equivalents are reported in the current asset section of a business's balance sheet.
  • Since cash is highly liquid and can be used immediately to settle a business's debts, it is included in the current asset section of the balance sheet.
  • While the balance sheet may combine all cash and cash equivalents into one number, a business can provide further detail about its cash balance in the footnotes to the financial statements.
  • With regards to cash, the footnotes can explain how much of the cash balance was composed of actual currency and how much was cash equivalents.
  • Cash and cash equivalents are reported on the balance sheet.

• Components of the Statement of Cash Flows

  • The cash flow statement has 3 parts: operating, investing, and financing activities.
  • In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
  • Essentially, the cash flow statement is concerned with the flow of cash in and out of the business.
  • For businesses that use cash basis accounting, the cash flow statement and income statement provide the same information, since cash inflows are considered income and cash outflows consist of expense payments or other types of payments (i.e. asset purchases).
  • Statement of cash flows includes cash flows from operating, financing and investing activities.

• Importance of Cash Flow Accounting

  • The statement of cash flows provides insight that the balance sheet and income statement do not, particularly in regard to a company's cash position.
  • Cash flow is the movement of money into or out of a business, project, or financial product from operating, investing, and financing activities.
  • The measurement of cash flow can be used for calculating other parameters that give information on a company's value, liquidity or solvency, and situation.
  • Management is interested in the company's cash inflows and cash outflows because these determine the availability of cash necessary to pay its financial obligations.
  • To determine the timeliness of cash flows into and out of projects, which are used as inputs in financial models such as internal rate of return and net present value

• Defining the Statement of Cash Flows

  • A statement of cash flows is a financial statement showing how changes in balance sheet accounts and income affect cash & cash equivalents.
  • In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
  • Essentially, the cash flow statement is concerned with the flow of cash in and out of the business.
  • Provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances provide additional information for evaluating changes in assets, liabilities, and equity;
  • Indicate the purpose of the statement of cash flows and what items affect the balance reported on the statement