This enables the company to better match its inflows and outflows. However, this also means that much of what constitutes earnings is not a direct, immediate cash flow. There are a number of items that will appear on an income statement that are either flows that have already occurred, or are flows that have not yet occurred. However, because the transaction was based in that quarter or year, it appears on the income statement. Earnings, therefore, are intended to reflect the firm's economic activity for the period, not its cash flows.
Cash flow forecasts outline what the firm will have left over after it collects all of its money for the period and pays out all of its expenses (Forsythe, 2006). Because this measures the firm's economic activity, it can be used as an alternative to earnings in evaluating a firm's performance for the period. A cash flow forecast, by contrast, allows management to understand how much cash it will need to operate in the quarter and compare this figure directly with the amount of cash it is expected to receive from all sources. Financing cash flows, for example, are an important element of a cash flow forecast that is not reflected at all in the earnings.
It should be noted, however, that because cash flow forecasts are based on predictions of the future, they are subject to considerable deviation from actual cash flow results. While there are a number of ways to construct a cash flow projection, one common way is to base it on previous results. Even when management accounts for estimated growth rates and the addition or removal of unusual transactions, the forecast may still be subject to deviation because of changes in the prevailing internal environment (cost structure) and external (competitive, economic) environments. The firm is apt to assume that performance for the next period is likely to be similar to performance from a past period, but for any number of different and unforeseeable reasons it may not be.
There are some other reasons as well...
Airline Performance Review and Analysis TKL Air Lines will be an American Airline that will be operating in the multiple routes across North America in the United States, Canada and Mexico. TKL will provide the cargo and passenger services serving more than 30 destinations. The company will also be serving up to 10 million customers yearly, and more than 1,500 customers for the daily flight. TKL's major activities will include inbound
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