Explain complex financial data and discuss the cause and effect of select accounting transactions on cash balances.
Read the fictional scenario and respond to the checklist items.
Scenario:
The chief financial officer (CFO), Karl Richland, of Semtell Company in Cincinnati, Ohio, is asking for your advice. The CFO explains sales are increasing but there is a constant matter of not having enough cash to meet payroll or pay vendors within 30 days.
Checklist: Using the information contained in the company’s cash flow statement, prepare an informational business letter to the CFO to explain:
Why cash can go down even when sales are up.
How increases in accounts receivables and inventory balances affect cash flows within a company.
What effect increases or decreases in asset and liability accounts have on cash flow.
How changes in accounts payable balances impact cash flows.
Recommend a possible solution for the company’s shortage of working capital.
Your informational business letter should:
Use the accepted business letter format and example as provided above.
Utilize Standard English and use correct spelling and grammar.
Provide a clearly established and sustained viewpoint and purpose.
The writing should be well ordered, logical, and unified, as well as original and insightful.
Include at least one reference source from the following textbook: PARRINO, R. O. B. E. R. T. (2017). Fundamentals of corporate finance. JOHN WILEY.
Your business letter must be written in a minimum of 2 pages, single-spaced, using current APA 7th edition formatting.
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