Posted: February 16th, 2023
(Discussion Question One)
·Discuss how can management control cash. Your discussion should include what tools management may use to control cash.
· Using the same company and annual financial statements that you chose for your Week 1 Discussion Forum Reading and Using the Annual Report Case Study, disclose the company’s cash balance, and discuss if you believe the company has too much or too little cash. Be sure to support your opinions with supporting facts.
· Discuss management’s responsibility to establish overall basic internal controls. Provide a real-life example from a work situation where you saw basic internal controls in place.
Your initial response should be a minimum of 200 words. Graduate school students learn to assess the perspectives of several scholars. Support your response with at least one scholarly and/or credible resource, in addition to the text.
(Discussion Question Two)
You may consider using the same company and annual report that you chose for your Week 1 Discussion Forum, Reading and Using the Annual Report Case Study. This choice will work only if the company is using the straight-line depreciation method. The company’s choice of depreciation method can be located in the notes to the financial statement in the annual report. If the company does not use this method or does not have long-term assets, you will need to choose another company. Select a company that a fellow student has not already posted.
Using your selected company’s financial statement,
· Calculate the average life, average age, and asset turnover ratios. Discuss what each ratio tells you in the context of your chosen company.
· Calculate the accounts receivable turnover ratio and convert that ratio into days. Discuss what each ratio tells you in the context of your chosen company.
Your initial response should be a minimum of 200 words. Graduate school students learn to assess the perspectives of several scholars. Support your response with at least one scholarly and/or credible resource, in addition to the text.
SOLUTION
Managing cash is crucial for the success and survival of any business. To control cash, management needs to implement various tools and techniques. One of the most basic tools is to monitor and manage cash flows through budgeting and forecasting. It involves estimating the inflow and outflow of cash, ensuring that sufficient funds are available for daily operations, and avoiding cash shortages.
Another tool is to implement internal controls to reduce the risk of fraud or theft. For instance, segregating duties among different employees, implementing purchase order systems, and regularly reconciling bank statements.
Furthermore, management may also use financial statements to analyze cash inflows and outflows. For example, the cash flow statement can help to identify the sources of cash inflows and outflows, and the balance sheet can indicate the company’s cash balance at a given point in time.
Regarding the company’s cash balance, using the same company and annual financial statements as in the Week 1 Discussion Forum, the cash balance for Coca-Cola in 2020 was $8.7 billion. In my opinion, Coca-Cola has a reasonable amount of cash given its size, the nature of its business, and potential contingencies such as economic downturns or emergencies. Moreover, the company has been paying dividends regularly, which may require a significant amount of cash.
Management’s responsibility is to establish overall basic internal controls to ensure the accuracy and reliability of financial reporting, safeguard company assets, and promote operational efficiency. For example, in my previous work, we had a process for approving and recording all expenses, with supporting documents and multiple levels of approvals, to prevent fraudulent or unauthorized expenses.
Calculating the average life, average age, and asset turnover ratios for Coca-Cola in 2020, the average life was 12.8 years, the average age was 6.5 years, and the asset turnover ratio was 0.56. The average life indicates the estimated number
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