I was tasked with the responsibility of turning a downtown parking spot into an office apartment. It is critical to note that the responsibility bestowed upon me was significant and the importance of this is that it creates jobs for people in the otherwise ailing economy. To have this observed adequately, I had to understand the importance of making various calculations and going through some of these calculations is important for it enables me to manage finance well. One of the major calculations that I engaged in is the cash flow.
In carrying out the cash flow, I used a combination of both the indirect and direct method that I found rather compelling. In the indirect method, I got first to review the previous net income calculated, and the importance of this is that ensuring a reconciliation between the net income and the amount of money provided to me through the operations. In the use of the indirect method so as to understand the importance of using the indirect method to understand the change in managing money after moving from the downtown parking to the office area or space.
The first step involves the calculation of the net income. The company ought to seek and calculate the amount of money that it generated from previous businesses and record it. After that, it is vital to go through the final none cash expenditure. The stated expenditure is the amount of money that is spent on important stuff such as the acquisition of land where the office space will be. The sum of money paid there is not bound to get back to the company, and this is an example of such expenditure.
The following step involves the deduction of the none-cash expenditure from the net income got. It is also imperative to adjust for the losses on the sale of the assets, and the importance of this is that it ensures that these were either added or reduced from the total calculations. I also made sure that deducted the non-cash assets and the reason for this are that they do not add any profit to the company. All current assets ought to be added in the various calculations, and the importance of this is that it leads to a balance of the cash flow and in the case of the balance sheet; sides, the assets, and liabilities balance, as they ought to.
I used the direct method and technique of calculating the cash flow by measuring the way in which money flowed from investment activities. The way, by which I went through this involved, the calculating of the amount of money spent on the long-term assets and measuring the marketable securities provided for the company seeking to establish the office area. The values are put together through addition, and the total amount got is set aside. Making and negating on loans is the second stage used in the second step of the direct means of calculating the cash flow. From the initial calculation carried out in this direct method, one takes the second stage of the cash flow process and deducts the amount. In other definition of the calculation, it is imperative to simplify it as add back of the calculated losses and subtraction of gains.
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