Introduction to Accounting and finance -- Economics, Finance and Assignment - 1

Introduction to Accounting and finance -- Economics, Finance and Management - Assignment spokespersonThe expenses of the company increases and company may not have enough cash available to meet its expenses. Therefore, the cash deficit is met by bank overdraft which affects companys liquidity position.Company should not make all the gross revenue and purchases on credit. It should choose a fair combination of cash and credit sales/purchases so that, companys receivables and payables dont reach peak levels.It is probably not possible to collect the total keep down of credit sales. Some amount of credit sales turns into bad debt expense which cant be recovered. Company should allocate small percentage of sales to bad debts.Cash is what keeps the crinkle functioning. Company requires cash on hand to pay for its operating, investing and financing expenses. The amount of cash available/deficit is calculated by cash bunk narrative. Hisrich, Peter & Shepherd states that Cash flow resul ts from the difference between actual cash receipts and cash payments (1998p.297). The difference between cash flow statement and profit statement is that cash flow doesnt consider payment of non-cash expenses, payment of loan principal and withdrawals. (Rosemary, 2010)Profits are generated by subtracting operating expenses from sales and it is calculated through income statement. Income statement tells about the total sales made during the year whether or not sales receipts are collected or not.In June, Hidetoseek Ltd. is incurring profit but its cash flow is negative which shows that companys expenses are greater than receipts. Therefore, it should use bank overdraft to meet its expenses.If kept up(p) earnings are used, the liquidity position of the company is badly affected. The cash reserves of company decreases which means that if the company wants to pay for its debts or incur rough capital expenses, it will not be able to raise significant funds through its reserves.An over draft occurs when