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Archive for the ‘Cash Flow Statement’ Category

Balance sheet shows the financial situation of a company at a point in time (the balance sheet date). It includes three aspects: assets, equity and liabilities. The analysis of balance sheet is a complex process. It not only includes a large number of managing information, but also need to be analysed comprehensively with the income statement, cash flow, accounting policies and explanatory notes.

You must understand the structure of balance sheet. The face of the balance sheet should include:

property, plant and equipment

investment property

intangible assets

financial assets

investments accounted for using the equity method

biological assets

inventories

trade and other receivables

cash and cash equivalents

trade and other payables

tax liabilities

provisions

minority interest

issued capital and reserves.

Here, there are four main ratios groups when you’re analysing the balance sheet: profitability, management effciency, financial and investment. Balance sheet involves the analysis of the management effciency and the financial. The analysis of the profitability and the investment need to combine the income statement.

Management efficiency:

Inventory turnover.

It insteads the turnover rate of the enterprise. Generally, if it’s commercial enterprise, the more higher, the more better.

Accounts receivable collection period.

The more quicker, the more better. It shows the speed we can regain the cash.

Accounts payable payment period.

It represents a source for free finance.



Financial:

Current and liquid ratios.

It shows the short financial situation of the enterprise. Is the current assets sufficient to redeem the current debt? How much to redeem the current debt when the current assets minus the inventory? We know sometimes there are some problems in turning the inventory into cash.

Equity to assets ratio.

The equity to assets ratio shows what proportion of total assets is financed by equity, and hence what proportion is financed by loans and non-equity shares.



Balance sheet is one of basic financial statements. You must know income statement, cash flow, accounting policies and explanatory notes. And you should understand the difference between the balance sheet and income statement, and know the key of how to analyse the balance sheet.

When a real estate investor or analyst wants to determine whether a rental property is profitable and might offer a good investment opportunity or should be dismissed, they commonly evaluate the property’s projected future revenues.

The idea is to estimate the cash flows and rates of return a rental property may produce for future years by projecting its income, operating expenses, and loan payment out for maybe ten years based upon some assumptions.

The concept is straightforward. Increase the income and operating expenses annually by some estimated percentage rate to arrive at a net operating income (income less expenses), then deduct the mortgage balance owed for that particular year to compute the property’s cash flow and subsequent rates of return. The proforma income statement (or proforma) is generally the report used to project these revenues, and in this article, we’ll discuss some simple basics to give you the idea. Please feel free to visit my website if you would like to see a sample proforma.

How to Create a Proforma You can choose one of two methods. You can use a spreadsheet or you can invest in a real estate investment software solution that provides the forms and will create a proforma income statement for you.

In any case, the important thing is to start the proforma with numbers that accurately reflect the property’s current financial position, i.e., income, operating expenses, and loan payment. This will represent year one.

Next, make an estimate as to how much you think income and expenses will increase annually (use separate percentage rates for each if you wish) and multiply your starting numbers by these rates to calculate for year two, year two’s numbers again for year three, and so on out as many years as you deem necessary (ten years is typical). Be sure to include the loan repayment for each of those years.

Finally, for each year, subtract the operating expenses from the income to determine the rental property’s net operating income then subtract the loan payment to arrive at the cash flow (or more specifically, cash flow before taxes).

For a more elaborate income statement that shows cash flow after taxes, sale proceeds, cap rate, return on equity and so on, you will need to include tax information such as depreciation, mortgage interest, amortized loan points and the investor’s marginal tax rate, a projected selling price for each of the years, and a round of additional computations for the rates of return.

Start with year one and then add each of the figures to the following years. You can inflate a sales price in exactly the same manner you did for income and expenses or select another way to project a sales price such as with a cap rate, gross rent multiplier, or set dollar amount. The depreciation rate depends on whether the rental property is residential (a home rental or apartments), or non-residential (commercial use). The loan will also have to be amortized so you can determine the amount of interest paid during each year.

You can find information regarding the depreciation schedules online if you’re planning to construct your own proforma, otherwise a good real estate investment software solution will have it built in to the program and you will just have to fill in the forms.

Whether you choose to use real estate investment software or a spreadsheet, here’s what you want to keep in mind about your statement.

1) You are essentially looking to analyze the cash flow and other performance measures resulting from changes to such variables as income, operating expenses, and property value over some number of future years.

2) Because it consists of projected estimates, don’t rely solely upon a proforma income statement to make your investment decision.

3) Also, because it is speculative, you might not want to construct your proforma out further then ten years.

4) Always use income and operating expenses that are realistic to begin with and then use a reasonable percentage rate to inflate them annually. The same would be true with the projected selling price of the property.

To get a better idea about creating revenue projections for rental properties, you can see a completed sample proforma on my website. Here’s to your real estate investing success.

Bank reconciliation is a very complex and very tedious process. Bank reconciliation is the method of comparing and matching figures from company’s books against those shown on a bank statement. Reconciling your bank account statement is an absolute essential even if it is a costly and time consuming task.

Bank reconciliation is an important part of the monthly cashflow related to your business and should be done as soon as the statement appears from your financial institution. Bank reconciliation statement helps businesses to reduce the amount of unutilized cash in accounts. By adding deposits in transit, deducting outstanding business checks and adding or deducting bank errors, you will control business cashflow thus managing successful business operations.

Advantages of Bank Reconciliation

It makes important updates to general ledger and receives timely entries from the other applications. Provides the ability to reduce bank statement errors Enables to control cash flow with the invalid checks and stop payments function Verifies the amount of cash in your account It helps to found uncover irregularities

Whether you want to outsource all your bookkeeping services and financial accounting requirement or need any help in a specific area like bank reconciliation, Accounting Bank Reconciliation and preparation of bank reconciliation statement outsourcing such tasks is a wise idea. By outsourcing your bank reconciliation and other financial accounting and bookkeeping tasks you will save time and money.

Bank reconciliation statement helps businesses to reduce the amount of unutilized cash in suspense accounts. By adding deposits in transit, deducting outstanding business checks and adding or deducting bank errors