Respuesta :
Answer:
The answer is "if changes are occurring in a firm's mix of assets".
Explanation:
The alternative form to conventional financial statements is a common-size cash flow. Whenever a standard cash flow provides information as cumulative figures for a specific period, each figure can be seen in a horizontal analysis balance sheet as a percent of the overall value with one financial data class. Whenever a corporation, for instance, lists a $1,000 US Dollar (USD) of receivables as well as a current total accounts income statement of USD 8,000, the common size statement reported accounts receivable as 12.5% (1,000/8,000) for each balance. It introduces any section of an income statement - assets, debts, and landlord's stock and income.
Asset values are normally divided into the above sections. Each section will include a sum such that executives can calculate their meet the diverse needs' sums of capital, liabilities. The statistics shown are as followed: $1,200 of US$ cash, $1,000 of fixed assets, $5,000 of stock, or $800 of US$ marketable securities. It information would occur in the common sized income statement in the form of 15% cash, 12.5% of the account receivable, 62.5% in the stock, and 10% in capital assets, for 100%.
Develop a popular cash flow will help business owners spend a little less time checking the financial information for their companies. That total dollar value of money is important to know; furthermore, this can be represented by the shareholders/operators as a ratio to see where the much money their company has got. For example, strong stock amounts will show a lower cash position. High payables can reflect higher cash or inventory flows as businesses sell further goods that money. Obligations may tell similar stories too though.
Important rises in accounts payable, lines of credit, and other brief notes payable may mean how an enterprise needs equity funding for its activities. Shortly, this scenario can generate difficult cash flows and other business activities.
The Common size financial statements allow companies and administrators to monitor their lengthy capital, lengthy mortgage, and debt information, and notes payable. Although such accounts may not be a priority for brief reasons, a large increase/diminution in these products could be an issue within a business. Popular financial reports also enable managers and owners to contrast their income reports of their enterprises with that of a rival. The comparison will easily assess the company is stronger or better in certain areas by presenting all statements in percentage terms. Therefore the income statement base amount is typically liquid equity (the same amount as current debt plus common shareholders). Through contrasting the popular cash flow over up to two years, adjustments throughout the asset, liable or equity together are apparent.
