As I have mentioned before, I have
studied previous accounting subjects and have came across a lot of what was
included in this chapter already. I look
at financial statements on a daily basis for my job. I have also had to
complete a set of financial statement for a subject complete earlier in my
degree so I believe I am familiar with the Balance Sheet and Income Statement
and Statement of Change in Equity. When I saw we would be looking at the fourth
financial statement, The Cash Flow Statement I was quite interested in this. I
have minimal work on cash flow statements, I was aware it measured the cash you
already had at a date plus the
businesses inflows and outflows of cash, but have never really had to complete
a detailed cash flow statement or analyse a detailed cash flow statement before.
I am excited to learn more about this report through the term.
Ratios are another concept I am
exciting about learning more about. I have done some ratio work before, in high
school using basic financials, nowhere near as detailed and complex as financials
like PTB Group Limited. I was also aware that ratios result are compared to
other organisations in the same industry and against the industries average,
and I am very excited in looking more into PTB Group Limited ratios so see how
well this organisation is actually doing compared to the industry average. I
loved how the chapter has explained the history of how the ratio concept was developed,
it made it an interesting read.
I found the Dividends section of
chapter 3 very difficult to read. I have to re-read this section two or three
times to fully wrap my head around what it was trying to tell me. The cash flow
was interesting to me and I liked the way it explained the relationship between
the dividends and cash flow.
Dividends – Operating cash flow –
Capital outlays + Net cash flow from owners
Immediately after reading this, I
skipped straight to the explanation about capital outlays because I wasn’t aware
of what this was. Operating cash flow and net cash flow from owners I could
make my own assumptions as to how these items might be defined. From reading
what capital outlays actually means I have learnt that it is the cash invested
into the operating assets of a firm, the cash that has been invested in the
assets that actually generate the products or services for sale.
The term cash flow is often used
to refer to a number of different things. I did not know this at all, I just
assumed that it was the physical cash of an organisation plus the future cash
outlays and inflows. I did not know that there was FCF Cash Flow and EBITDA. Free
Cash Flow is cash generated by a business after allowing for on-going capital
investments, after reading this I thought about this for a while and it makes
so much sense to include this.
A question I am left wondering
after reading chapter 3 and spending most of my time looking at the dividends
and cash flow sections of this chapter is why Ryman Health Care borrowed money
from the bank to pay out a dividend to its shareholder? Why would they do this?
I did not know that companies did this for their shareholders. I have seen from
working in an accounting firm that some companies just do not pay out a dividend
in some years, so this is why I am questioning why they would have borrowed
money to help fund a dividend to shareholders.
Overall, chapter 3 was a revision
of what I have already learnt except for the topics discussed above.
