Statement Of Cash Flow Analysis

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Statement of Cash Flow Analysis After having analyzed the statement of cash flows from the 2011 and 2012 financial statements, it is clear that Tesu SZZ d.o.o. is inaccurately recording their assets, liabilities, and shareholders equity. However, their financial stability is not the only issue at hand. Their net income and net cash flow are both negative, therefore, it is clear that the product of this statement will not have a positive outcome. The statement of cash flows commences with a negative net income. That, in addition to the increase in accounts receivables during the year, results in a negative cash flow from operating activities. Although Tesu reduced their inventory by a significantly large amount, held back on their…show more content…
Financial Ratios Analysis In analyzing Tesu SSZ d.o.o., financial ratios were used as a tool to examine their financial statements. The categories of liquidity, efficiency, solvency and profitability were used, as seen in Exhibit 2. Although there are no industry averages to compare Tesu’s financial ratios against, the two years of data from 2011 and 2012 can be compared against each other to draw conclusions about the current financial situation. Liquidity In order to understand how Tesu meets cash requirements quickly, it is necessary to review the current ratio and quick ratio. The higher liquidity is generally better as it demonstrates that the company can repay its lenders. As seen in Exhibit 2, the current ratio is positive. However, it is decreasing from 2011 to 2012. Although the quick ratio increased slightly between the two years, it is still not at an acceptable level. The company’s liabilities are greater than their current assets due to the high costs of accounts payable, which has resulted in the low ratio numbers. Currently, Tesu has a significant sum of money owed in terms of unpaid wages and payroll taxes to the government. In order to increase liquidity, the company must increase its current assets. Generally acceptable levels for liquidity are 2.0+ for current ratio, and 1.0+ for quick ratio. As Tesu continues to grow in 2013, their current liabilities will begin to go down as they collect outstanding
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