The cash account is likely the most important account in a company. No matter how much revenue they are generating, if they don't have enough cash to fund daily operations, managers (and the company they work for) aren't going to be around for too long. A company's cash account holds all records of transactions related to cash, particularly cash receipts from customers that are entered in the cash receipts journal and cash payments to vendors are entered...(take a guess here)...that's right, in the cash payment journal.
This information is then transferred to the general ledger that includes all revenue and expenses for the company. The amount of cash a company holds at a certain point in time (such as the end of a quarter) is listed on its balance sheet, along with cash equivalents that could be quickly converted to cash, such as Treasury bills and money market funds.
Some companies hold the enviable position of having too much cash on hand and must figure out what to do with it all. Many decide to give some back to shareholders in the form of stock buybacks and dividends.
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![Finance: What is a Cash Cow?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.644_770x433.jpg)
Finance: What is a Cash Cow?0 Views
Finance a la shmoop what is a cash cow? that feels good [Person milking a cow]
mmm that's the spot yep that's me I'm a cash cow and boy howdy does that ever
feel good in the morning well I'm a type of company that's a natural part of the
business cycle and which kind of goes like this [Business cycle chart appears]
early companies are cash pigs those pigs eat everything including tons of cash
and let me tell you what comes out of them
it ain't milk...young companies need cash capital to grow like to build server
farms yeah like that and you know different kinds of farms and oil rigs
and chemical synthesizing plants and tractors smelting factories and stamping
machines and massive robotic thingamabob makers those well those early companies
chew up tons of cash as they build their business early in their cycle building
revenues and they might burn, i dunno five million dollars in year 1 to make 1 [Stack of cash burning]
million dollars in revenues not profit that's just in revenues then they pig
out on 20 million dollars in losses in year 5 but by then maybe they have a
hundred million dollars in revenues then they begin to chill as they grow out of
being a pig into yes higher life-forms like me where they maybe start to break
even on 500 million in revenues and no losses and no profits just
breakeven and by the time they've truly evolved into me, way over here on the
bell curve of their lifecycle then they're producing tons of cash like this
CD company which now has three billion dollars of revenue in a billion bucks in [CD 'R' Us store appears]
cash profits unfortunately its future doesn't look all that great as revenues
have likely more than peaked and it'll produce a whole lot less cash in the
next decade as they you know kindly put it out to pasture so if it doesn't buy
more growth companies with its cash yeah then it becomes dinner [Butcher slicing meat and blood appears on camera lens]
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