Construction of the cash flows Essay Example | Topics and Well Written Essays - 1000 words

Construction of the cash flows - Essay Example The users of the financial statements are very interested to learn how the business generates and uses it cash and cash equivalents during a particular period. Thus, the statement of cash flows is very important because the company wants to control the timing of the receipt and disbursement of cash. For, the company needs cash inflows to pay the budgeted and maturing cash outflows such as payables. The cash flow statement clearly shows the company management's ability to juggle the incoming and outgoing of funds. Also, cash inflows from operating activities are defined as those coming from it revenue generating activities. In our case, the airline tickets are bought because they need to visit the different revenue generating shops in different parts of the United States. Capital Budgeting (Maher, 1997; 279-20) involves deciding which long term investment to undertake and how they are financed. Examples are buildings, land, factory site, factory equipment and others. Furthermore, an item is capitalized, meaning recorded as building, equipment, factory and others, if they are tangible assets held by the enterprise for use of production of goods for sale and rendering services. And, the asset bought will be used over a period of more than one year. Thus, the airline tickets only benefit the day or the current accounting period when the flight was taken. Thus, the airline tickets do not fall under capital expenditures but only operating expenses. In the construction of the cash flows associated with the commercial airline contract option, should the analyst include the average cost of business class tickets Yes, because the average cost of business class tickets involves cash flow or cash disbursement or cash payment. As discussed above in the theory of accounts it is part of operating expenses in the cash flow statement. Appendix A shows that for an annual average of 48 annual trips consisting of 4 travelers per trip at $1,000 per round trip ticket, the annual cost for this specific year is $192,000. Also, for the following year at 50 trips at 4 persons per trip the total cost for that year in terms of plant tickets is $200,000. the continues the computation until the year reaches 79 flights in 1 year at 4 persons per year totaling $316,000. QUESTION In construction of the cash flows associated with the commercial airline contract option, should the analyst include the cost of upgrading a business class fare to a first class ticket yes, for the same reason above. The average cost of upgrading a business class ticket to a first class ticket involves cash flow or cash disbursement or cash payment. As discussed in the theory of accounts, it is part of operating expenses of the company to support its day to day operational management Appendix B below shows that for the year when there are 48 airline travels consisting of 4 persons per trip, the first class ticket at $1,300 per ticket will increase the ticket cost on this particular year to $249,600. This is $57,600 bigger than the computation of ticket at costs in Appendix A below. Also, for the year when 50 flights with 4 persons at $1,300 first class, the total airline ticket costs for that year is $260,000 which is higher than the above data by where the business class total cost for the year is only $200,000.

BUSINESS PLAN Essay Example | Topics and Well Written Essays - 1250 words

BUSINESS PLAN - Essay Example Provides guest house facilities in the area of Manhattan in the big apple, which is New York. The company realizes the important role played by the service industry in providing services to travelers around the world by meeting their lodging needs. In line with this, the service industry has been one of the most growing industries especially in the Manhattan borough following an influx of travelers in this area. Hence, the company realizes the need to fill the gap by providing lodging facilities aimed at travelers from South Korea. The founder and CEO [Insert your name here] currently holds the company’s stock. For many years, South Koreans have been coming to New York, more so to the borough of Manhattan and they have faced numerous problems regarding their lodging needs. As a result, they have been forced to spend a lot of money on boarding or resulted to finding illegal boarding and lodging facilities that did not have operation licenses. In effect, they have experienced in stances of insecurity and Eagle Guest House Ltd wants to change the current state of affairs by providing affordable lodging facilities to this group. ... The company also aims at steadily growing and becoming profitable in the second year of its operation. Industry and Competitor Analysis The service industry in New York has many international and local hostels that meet the needs of different travelers. In the borough of Manhattan, many hotels offer services to clients although most hotels offered discriminative prices on their services. In this case, the hotels were expensive for an ordinary South Korea. On the other hand, various illegal Korean guesthouses faced the prospects of closure due to their illegal operations. Hence, there is a need to fill this gap. Target Customers The company targets customers from South Korea who travel to the United States, and especially to the borough of Manhattan. Due to the elimination of visa requirements for South Koreans to travel to the United States two years ago, there has been an influx in the number of travelers to the country. Hence, this is the clientele that the company targets with for ecasts indicating that more South Koreans are traveling to New York, and especially to the borough of Manhattan. Company Description Eagle Guest House Ltd is a startup. Hence, the company will be starting its operations once it outlines the plans necessary for any startup. However, the specific objective of the company is to meet the demand for affordable boarding and lodging needs for South Koreans who traveled to the United States, and especially to the borough of Manhattan. In line with this, the company’s other objectives are to enhance profitability during the second year of business, which implies that the first year of business will be to establish the company and create a foundation for profit