The most confusing part of the reading to me was the section
titled “The Cash-Flow Statement”. Although
I could understand parts of it, when it came to financing activities and
operating cash flows, I was a bit confused as I do not have any real
economic/business background to understand the jargon. I was
also confused on the operating budget, specifically how it could be modeled in
a simple linear regression. Finally, the
sections about the Payback method and NPV method were extremely confusing as I
could not really understand what value was present in them.
Something I found interesting in the reading was the section
titled “Ratio Analysis”. This showed how
one may be able to determine the strength of a company by looking at its total
debt and compared to its assets, comparing the interest a company must pay to
the income it has available for interest payment. It is interesting to see how an entrepreneur may
be able to use these ratios in order to make decisions about what sorts of
financial obligations they can take on both in the long term and short
term.
There was nothing I really disagreed with the author on.
The first thing I would ask the author is of the three
budgets talked about in this chapter, which is the most pressing? I would also ask what are the major downfalls
of using break even analysis compared to the other tools mentioned for making
decisions?
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