STUDY ON THE IMPORTANCE OF CASH FLOW ANALYSIS BASED ON RATES IN THE FINANCIAL
DECISION MAKING PROCESS
Ph.D Student Faurescu Florentina-Simona Faculty of Economic and Business Administration University of Craiova
Abstract: : Cash flow is the most viable source of information for managers, and its interpretation is one of the most important objectives of the management team to acquire the desired efficiency. This paper highlights the importance of correct interpretation of cash flow and using results cash flow's analysis using financial rates.
JEL classification: M21,G31
Key words: cash flow, cash flow rates, decision making process, the real financial
position, external sources of funding
In the present period is particularly important given cash flow analysis, at the expense of accounting profit analysis. This is because the existence of many companies, which although profitable, have a significant shortage of liquidity and to support his work and make the necessary investments to increase efficiency, resort to external sources of funding.
In this context, it is necessary to establish the primary objective of managers as maximize enterprise value by maintaining a relatively steady cash flow, not profit maximization. This new orientation is particularly appropriate for investors who are interested in medium and long term results and less short-term performance .
To get a better cash flow and its forms of expression, will be presented cash flow situation, how to do it and the main features of the main activities carried out within an enterprise.
Cash flow statement is a basic information source for economic and financial analysis. It is drafted in accordance with IAS 7 and in Romania, as in other developed countries is considered a component of the enterprise's annual financial statements based on OMF 3055/2009 approving the accounting regulations harmonized with European Directives and International Accounting Standards[OMFP3055/2009].
The objective is cash flow situation to provide necessary information for internal users, such as shareholders, managers and employees, as well as for external users such as
suppliers, financial creditors and customers, that information regarding current and future capacity assessment of a firm to generate Cash or cash equivalent[Valceanu,2004].
Cash flow allows dynamics analysis of financial balance by describing mining operations, investment and financing, thus obtaining a true picture of the changing financial position of an enterprise during the period.
It shows the cash flows resulting from the three activities performed at an enterprise (operating, investing, financing) and can be determined by two methods
- direct method, which shows all receipts and payments flows for the three types of activities,
- indirect method, which shows the operational flow starting from the net result of the exercise, which is corrected with changes registered capital, as well as...