The article from the beginning of the chapter
Summary:
In this article, it talks about how successful Frantic Films is. Frantic Films is a company that helps to create the computer-generated visual effects in films, lifestyle programs, and commercials. Frantic Films are created by two guys named Chris Bond and Ken Zorniak. Bond is the expert in computer graphics and animation skill; as Zorniak is good at business management and marketing. The secret of its success is the control it has on its cash flow and debts. When it gets a project, it will first calculate all the expenses, and borrow a loan that is for the life of the project. Frantic will also pay off the loan as soon as possible after the project is done. In this way, the company’s debt will always be minimized.
Connection:
This chapter is teaching us about cash flow statement. Cash flow statement is one of the most important financial statements that people would use to analyze a company. It does not only include the information of the income statement, it also includes the other information of where the company spend its money on. The cash flow statement is always divided into three parts which splits the company’s activity into three major categories which are operating, financing, investing. It is very important for the organization to use the information in this financial statement to make the right decision for the company.
Reflection:
I think it is true that if a company want to be successful, it definitely needs to control its flow and debts. Some companies will often leave off their debts unit the last minute, and they usually ended up failing. Even though they earn a profit from the money they borrowed, as long as the deadline has not arrived, they will not pay back the money. Instead they will use the new profit to invest in projects, but once the date has come, they are short of cash to pay the loan back.
1 comment:
I agree, it is very important to control cash flow and debts. Having too much cash means that you are not being as efficient as you could be and not having cash means that your company may be in troubles if cash is needed in a short period of time. This may eventually lead to bankruptcy if not well managed. Debt control is also very important in the success of a company as if debt is minimized, the chance of paying interest is less. Yet, it needs balance so that you can use your cash to the most effective use.
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