Discussion 2: Evaluating Profit and Cash Flows Any manager's job is to help the firm maximize its value, which is based on future cash flows. In order to understand future cash flows, informed managers must study their firm's financial statements. You st

Discussion 2: Evaluating Profit and Cash Flows

Any manager's job is to help the firm maximize its value, which is based on future cash flows. In order to understand future cash flows, informed managers must study their firm's financial statements. You studied various profit and cash flow concepts in your accounting course. With this knowledge, you developed a good feel for how well a company was doing historically. Your focus in this course is to develop capabilities in interpretation and use of these concepts. No matter what role you fulfill in the organization (e.g., marketing analyst, accounting manager, operations director, etc.), your knowledge of how to use financial data will enable you to provide good estimates of the impacts of future managerial decisions on improving the firm's profitability and cash flow enhancement.

To prepare for this Discussion, think about your organization or an organization with which you are familiar. Consider the importance of accounting profit, operating cash flow, net cash flow, and free cash flow for informing how the organization operates with regard to decision making. Also, consider how financial markets can affect future cash flows.

Note: If you are not in the position where you are involved in forecasting cash flows and profitability, interview either someone in your organization or a professional outside of your organization who can provide you with this information. In your post, be sure to identify the position held by this person.

Post by Day 5:

• Analyze the differences among accounting profit, operating cash flow, net cash flow, and free cash flow.
• Identify the key stakeholders in cash flow planning and profit estimation processes in the organization, and explain how they are involved in the processes.
• Analyze the impact of accounting profit, operating cash flow, net cash flow, and free cash flow concepts on decisions in the organization for which you currently work, one that you would like to work for in the future, or a small business you hope to start one day. 

Respond by Day 7 to two or more of your colleagues in one or more of the following ways:

• Comment on the use of cash flow planning and profitability estimation processes in your colleagues' various organizations. Support your comments with the resources from this week and additional research.
• Validate an idea presented by a colleague based on your own experience, the resources for this week, and additional research.