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WHAT IS A CASH FLOW FORECAST?
A cash flow forecast is also known as a cash budget. As a forecast or budgeted statement it deals not with what has happened but with what is expected and planned to happen. It should not be confused with a cash flow statement which is drawn up after the event. Cash accounting is not concerned with sales revenue, costs, profit or loss. It is only concerned with the flow of cash into and out of a business. Consequently, credit sales do not become positive items in a cash flow forecast until the cash flows in. Similarly, purchases of inputs are not negative items until the cash flows out. Non-cash items in a profit and loss account (notably provision for depreciation) do not feature at all in cash accounting. We can therefore define a cash flow forecast as a plan which states in detail the cash flow which is expected to take place over a specified future period.
COST
Fixed assets are “assets which a business intends to use on a continuing basis”. Thus purpose, rather than physical nature, determines whether something counts as a fixed asset. Cars, for example, which are fixed assets for many companies, are mostly current assets (stock) for Rover, which sells cars.
Accountants ‘capitalise’ spending on fixed assets in the balance sheet, rather than at once writing it off in full in the profit and loss account. But they do so only where (a) they can identify fairly accurately the cost of an asset and (b) they expect the cost to be recovered in full, normally out of future sales revenue. Point (a) rules out most spending on building up brands and general business ‘goodwill’. It is very difficult to split total spending on promotion between current and future benefits. Point (b) rules out the cost of most technical research. Companies probably wouldn't choose to spend the money on research unless they expected it to ‘pay’ (in the future), but a lot can go wrong — both on the technical side and the commercial side — and it is often difficult to come up with solid enough evidence.
For many fixed assets it is easy to tell the 'cost'. In addition to the basic invoice cost of the asset itself, it may include costs of transporting and installing equipment, legal costs on the purchase of property, etc.
PRICE
In theory organisations price optimally by using their knowledge of cost and revenue relationships to calculate the profit maximising price level. In reality organisations may adopt a very different approach to pricing.
To some extent the pricing practices followed will be determined by the objectives of the organisation. It is not usually the case that identical procedures are used by firms which seek to maximise profits as those which seek to maximise sales. It is also possible that pricing strategies in the short run are followed which do not lead to short-run profit maximisation, but instead to maximisation of long run profits.
There is no single approach to the way organisations develop the prices for their products and in some instances empirical studies (actual studies of how firms price) give conflicting views. Differences can also exist between what decision makers say they are doing and what they are actually doing.
PROFIT
Profit as an excess of income over outlay is not the invention of socialism. It existed long before its birth and was often damned (обсуждалось) as an expression of insatiable lust (ненасытной страсти) for gain and ruthless exploitation. But the whole point is, how it is obtained, and in whose interests it is used.
You will agree that there is a difference between the money “earned” by a dope peddler and the money a peasant, or a worker receives for his honest labour. It is not true that money has no smell. It does have a smell - a social one.
Hence, we cannot speak of profit “in general”. In economics such talk is meaningless (бессмысленный) and leads to errors. As one socio-economic system gives way to another, some economic categories acquire a fundamentally new social content while retaining their form and name, as has been the case with profit. To repeat, everything depends on how profit is made, and whose interests it is used.
WHAT IS COMMODITY?
The commodity is a product of labour made for exchange (обмен). Commodity production is a type of economic organization of society in which products are made for sale rather than for consumption (потребление) by the producers themselves.
For products of labour to become commodities, it is necessary, first of all, to have a division of labour whereby a person produces not everything he needs for his own consumption but specializes in some one kind of production. Secondly, the means of production must be owned by individuals or groups of individuals. When these two conditions exist (существуют), the sale and purchase of commodities become an economic necessity.
When we compare and evaluate commodities we are actually comparing the amount of labour contained in them. The labour embodied (воплощенный) in a commodity determines (определяет) the value of the commodity. Labour itself is not value. It only takes on a value when commodities are produced for exchange.
AN EXCHANGE
An exchange is a market, i.e. a permanent (постоянное) place in which persons meet with the aim of buying and selling. The trading there is governed by certain rules and is limited to members of the exchange, who are known as brokers. The two chief types of exchanges are the commodity exchange and the stock exchange.
Commodity exchanges have been established in important cities for trading in such commodities as cotton, sugar, grain, etc.
Among the more important commodity exchanges in Great Britan are the London Commodity Exchange (cocoa, coffee, hides and skins, rubber and sugar), the London Wool Exchange, the London Metal Exchange, the Liverpool Cotton Exchange and the Liverpool Corn Exchange. In the USA, the best-known are the Board of Trade in Chicago (corn), the New York Produce Exchange, the New York Coffee and Sugar Exchange.
Stock exchanges, on the other hand, are places where securities (ценные бумаги) are bought and sold. The most famous stock exchanges are the London Stock Exchange and New York Stock Exchange.
MONEY
1. Money is indispensable in a society in which commodity exchange takes place. In commodity exchange money plays the role of a universal equivalent, that of commodity expressing the value of all the other commodities.
2. Gold is the generally accepted money commodity. Because of its natural properties gold is the most convenient substance to carry out the social function of money. It can be easily broken into pieces and melted and “recombined” without any loss of value. It can also be kept safely as it does not become oxidized. In addition it has relatively small volume for its weight while denoting a considerable value.
3. Money performs a number of functions. First of all, it serves as a measure of value; that is, it is used to measure the value of all other commodities. Each commodity is sold for a certain sum of money, which expresses its value. The value of a commodity in terms of money is called its price.
4. Money is an ideal unit for expressing the value of all other commodities. What this means is that to measure the value of commodities it is not necessary to have cash. As acts of sale and purchase (i.e. the exchange of commodities for money) are repeated many times, the seller and buyer mentally equate the commodity to a certain amount of money (or gold) corresponding to its value.
5. When commodities are exchanged with the aid of money, the latter also serves as a means of circulation. To perform this function money has to be real, not ideal. What is important is that anyone receiving these symbols of value must be assured that they will be accepted from him too, when he pays for other commodities. That is why states declare paper money to be legal tender.
6. Money also serves as a means of accumulation or a way of hoarding treasures. This function stems from the fact that money can buy any commodity. Therefore, money is a universal embodiment of wealth and a means of accumulating it. Taken out of circulation, however , money becomes treasure only if it is gold, or money converted into articles of gold, silver and other precious metals or stones.
7. Money is not always in the from of cash. Sales and purchases are often made on credit.
Источник: В.В. Морозенко, И.Ф. Турук "Курс обучения деловому английскому языку"
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