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Transport Packaging Week 2, 351
Transport Packaging Week 2, 351
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Transport Packaging Week 2, 351
The structural design of a package refers to the making of a package in such a way as to ensure the product in it arrives at its destination safely while still marketing it to the buyers. It should also facilitate the distribution. According to Goodwin & Young, the distribution environment refers to the conditions a product interacts with during transportation to the final consumer. Transport packaging is the tertiary packaging of a product meant to ensure that the product is under protection for transportation. This ensures that products at their destinations in proper condition.
One of the considerations about the distribution environment that should be made during the structural design of the package is the mode of transport. Different modes of transport require different packaging (Goodwin & Young, 2010). Products under transportation by road may require sturdy packaging so as to protect the product from damage. Another consideration is the method through which the product will be handled during off loading and loading. When the products are to be moved by people from the mode of transportation, packaging should be smaller to contain smaller units compared to when a forklift is used to enable them to carry it. Materials used for packaging moved by people are also less sturdy compared to when a forklift is used.
Another consideration is the product that is being transported. If a fragile product is being packaged for distribution, the packaging should contain protective materials to protect the product from damage. This includes the cushioning of the package. For example, the wood crates to prevent the product from banging on the sides of the crate. Another consideration is the elements to which the package will be exposed. If the package will be exposed to wind, rain, snow and other elements of the weather, the materials used should be able to withstand these conditions. All these consideration must be taken into account when designing to ensure the safe distribution of the products.
References
Goodwin, D. & Young, D. (2010). Protective Packaging for Distribution: Design and Development. Lancaster, P.A: DEStech Publications.
Transport and Tourism
Transport and Tourism
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Outline
Introduction……………………………………………………………………..3
Transport and tourism Relation ………………………………………………..3
Tourism arrangement model (Leiper, 1979)…………………………………….4
Elements of transport supplies…………………………………………………..6
Supply of transport in TGR, TRR and TDR…………………………………7
Substantial Components of the supply of transport system…………………8-9
Infrastructure
Vehicles
Operation
Suppliers of tourist transport across the tourism system…………………….9
Factors that influences the supply of transport………………………………10
Demand for tourist travel and a trend in travel demand…………………………10
Demand for travel……………………………………………………………
Who create Demand for tourism transport………………………….………..
Demand of transport characteristics……………………………………………
What affects the demand of transport…………………………………………
Effects of transport expansion and innovation on global tourism trends………12
Conclusion
Introduction
Travel and Tourism are normally used interchangeably in normal conversations though the two do not mean one thing. Even though the transport industry gives the link that is amid dwelling and
destination regions of tourists, but the industry’s role as an agent responsible for making tourists reach these destinations has been considered as tourism. Suppose the capability of tourists to journey to favored destinations is withdrawn by the inefficiencies in transport system, there is some probability that the tourists will look for some other destinations. In this case, the task of transport in tourism will have been achieved not. Travel performs very essential role in tourism industry.1
The connection amid tourism and transport has been the debate topic in industry that is concerned with tourism, as the roles are interchangeable as some think, but the difference is quite distinct. The paper has focused chiefly on the transport being a way for achievement of the desire of tourists. Differences amid tourism and travel have been outlined. It brings out clearly the importance of all aspect of tourism and transport. 2
The tourism system model by Leiper 1979 is used in the explanation of these. It explores deeply on the factors that hinder transport on various conditions as well the factors that the affects its supply. It does not leave out the demand of transport and the matters that affect it.
2) Transport and tourism Relation
Travel and Transportation may be argued without considering tourism; however, the converse cannot happen as tourism can’t prosper devoid of travel and transportation. Transportation takes central position in tourism industry. Tourism wholly depends on transport but reverse at times might not be true. 3
1and 3 from Atoll, S. (2009). Transport & Tourism: Global Perspectives.Publisher Trans-Atlantic
2 From Otego, D. (2008). Tourism and transport, Toot publishers
It is mainly because of the development of transportation system that has resulted to an major expansion in tourism Industry.
The impacts of Transportation on the whole tourism system, has beckoned for an improved resource management. Good transportation enhances tourism for example, in biodiversity-rich places, starting of sensitive and inaccessible places by means of improved transport system and service can be disadvantageous to place’s ecology. Regarding such issues, it is vital to reflect the responsibility of transportation in such places. The relationship amid tourism and transport is quite evident. It is identified by Otego 1996 that transport can be regarded as one of three basic tourism’s components, extra two being, tourism market (demand) and product of tourism (supply). Tourism competitiveness depends on the transport system competitiveness and services of travel. In real sense, the connection amid tourism and transport is asymmetrical. Transport is the catalyst factor of which tourism can’t survive. The overturn can be two since travel can thrive without tourism. Transport and travel can hence be regarded as being in tourism but tourism cannot be in transport. It is an essential part of tourism. 4
Tourism structure model (Leiper, 1979)
Tourism System
Tourism happens only suppose people journey from their dwellings to the favored target to take the pleasure in the gorgeous sceneries or to pursue their personal interests. If not so, tourism can be taken as visit and the tourists not as visitors. A good example is when an individual who pays visit to the Tokyo cannot be taken as tourist suppose he lives and works in the same city. A tourist has therefore to depart from her/his dwelling place for a given destination through transport. 5
4 From; Les, L. (2004). Tourism and transport: issues and agenda for the new millennium.Publisher Elsevier.
5 from Chawla, R. (2000) Transport and Tourism, Somali Publications
The movement from his/her dwelling to the destination plays a significant function in realization of his/her desire of travel. Moreover, whilst roaming, a tourist will use the tourism’ product. The movement enhances the improvement of the design and quality of the product of tourist as well as the transport system. As mentioned earlier, movement is extremely vital in this achievement. Furthermore, it’s essential to give an organization outline for the studying tourism. In order for this to happen, we have to adopt model of Leiper’s. In the model, three tourism features are pointed out. The aspects brought out are; geographical elements, sectors of tourism and tourists.6
Figure 1
The model of Leiper has outlined 3 geographical elements:
Travelers-generating region (TGR)
Transit route region (TRR)
Tourist destination region (TDR)
6 From; Buda, D. (2001). Transport and leisure: report of the hundred and eleventh round table on transport economics. Saga sag Publishers
4.1) Supply of transport in TGR, TRR and TDR
Travelers-generating region (TGR)
Traveler-generating region (TGR) is the origin of the tourists. It is often referred as home region. Traveler-generating region is the generating market that encourages and boosts traveling.
Transit route region (TRR)
Transit route region (TRR) entails equally the short travel duration from their respective dwelling places to the destination plus extra venues on their way which may cause them (tourists) to make a short pause and pay a visit to the area. They might come to the areas coincidentally without planning to visit such areas. 7
Tourist destination region (TDR)
Tourist destination (TDR) is one among the significant elements in the entire tourism system. It stresses that which can be done by the suppliers for travelers. In fact, this not only comprises the bodily equipments that are vital for tourists’ attraction, but as well for the service that are useful in enhancement of the images and motivation of the tourism.
Tourist destinations perform like something that ‘pulls’ in the market and offer a region intended for the majority of the activities of tourism. Tourist destination region (TDR) draws various types of tourists with different products of tourism that are desirable and excellence of organization and service. It is the place at which the tourists can recognize their momentary objectives of journey. Tourist destination region (TDR) provides the tourists with ‘pull’ of a variety of kinds and generates a platform on which management and planning policies can be done. According to these we can say that, Tourist destination region (TDR) is the tourism’s heart. 8
7 From; Atoll, S. (2009). Transport & Tourism: Global Perspectives.Publisher Trans-Atlantic
8 From; Buda, D. (2001). Transport and leisure: report of the hundred and eleventh round table on
transport economics. Saga sag Publishers
The spatial movement that is from TGR through the TRR and finally to the Tourist destination region (TDR) is a very important and necessary section of the experience of tourism. Tourists have to consider numerous factors before they travel. Their intentions of travel differs as some go for pleasure, for their health improvement like when their countries are too cold they travel to others for warmth. Some do so for the gain in the business field while majority do so for enjoyment and recreational activities. And this makes specific qualities that have to be taken into consideration on rating of the travelers as tourists. They are either the people who are coming for the establishment a residence in a given country or state, visit shortly, or the students who ought to travel to the other parts to tour are also regarded as tourists. 9
The industry of tourism refers to organizations as well as businesses which aid in the promotion of the products of tourism. In the model of Leiper, different manufacturing sectors may be situated in various places. In TGR, tour operators and travel agents can be found. In the TDR, hospitality industry and attractions can be found and in TRR, the transport sector is found.
Elements of transport supply for tourists
Tourism system is composed of three elements:
a) Tourists,
b) Destination and
c) Tourism intermediaries.
Amongst them, the most vital is the tourist. Tourist is the tourism commencing point and it provides momentum for the tourism development. The destination performs as the object of the tourism. 10
9 From; Les, L. (2004). Tourism and transport: issues and agenda for the new millennium.Publisher Elsevier
10 from Chawla, R. (2000) Transport and Tourism, Somali Publications
It’s the region in which a variety of types of product of tourism are given out, eg lodgings, hotels, leisure amenities and other additional services. Tourism mediators aid in the connection of the TGR and the destinations of the tourists. It is comprised chiefly of the agents of travel and the transport, operators of the trip, and any other responsible body that assists tourists to apprehend their desire of travel and get experience in tourism. The main industry of tourism is made up of travel, transport, trade, lodging, and catering and also facilities of catering and tourist attractions among other more. For various segments or organizations to outfit all plans and tastes offer these services and products. The generosity industries grant entertainments and lodging for tourist. 11
The public should be aware that the system of tourism cannot be a self-sufficient system. The development of tourism system relies on assistance of environmental or exterior systems, like economic, socio-cultural, bodily, and political among others. The systems are mutually supporting one another. For instance, with no agriculture, nobody can deliver food for hotels; with no industry of oil, no vehicle will have ability to move and assist travelers. Tourism system, too, is as well significant to the growth of new organizations.
4.2) Basic Substantial Components of the supply of transport system
4.2.1) Infrastructure
Our systems requires good infrastructure so that it can attain the goals of provision of the principal requirements of the public and tourists and granting facilities of support for an effective system. It is better infrastructure that boosts tourist. Proper plans and policies are to be that aid in the development of infrastructure has to be designed. It is by good infrastructure that transport is as well enhanced. Better infrastructure better transport and vice verse. 12
11 Gui, L. (2009). TRANSPORT AND TOURISM: Developing Gateways as Tourist Destinations. Publisher LAP Lambert
12 Les, L. (2004) Tourism and transport: issues and agenda for the new millennium.Publisher Elsevier
There are several methods, plans and policies that should be put in place to ensure that such happens. There should be speedy integration and expansion of facilities of network. This is should be across urban and rural areas. When the broad are developed in a good way there will be ease in the travel and quick access to the parks and remote areas and this will promote tourism. This will increase the operation rate and better services offered to the tourists. 13
Vehicles
The vehicles that assist the tourist and travel within the parks and tourist centers should be of good condition. The vehicles that are outdated and are in poor conditions end up polluting the environment in the parks and the surroundings. They can be considered as the main cause of accidents as well. There are many ways of transport like, through the cars, rail, and even through the airplanes. However, air transport has been the major mode transport that is used by the international tourists. It plays a leading responsibility in inter-regional travels of tourists, which usually involves traveling over geographically distant places. Rates of Growth of global air travel are attached with the rates of expansion of global tourism.
Operations
All the operations at the park should be geared in tourism promotion. There should be good communications and better services to the tourists. This will boast the tourism industry. 14
4.3) Suppliers of tourist transport across the tourism system
The question about who the suppliers of tourist transport across the system of tourism are can be answered regarding the type of area to be toured15.
13 Atoll, S. (2009). Transport & Tourism: Global Perspectives. Publisher Trans-Atlantic. 14 Buda, D. (2001). Transport and leisure: report of the hundred and eleventh round table on transport economics. Saga sag Publishers 15 Duval, D. (2007).Tourism and transport: modes, networks and flows. Publisher Channel View Publications.
It is the regional personnel that provide the tourist transport across the tourism system. They are the people concerned with the tourism and their satisfactions. They are the people who also offer services to the tourism industry. When the park or area to be toured belongs to the government or any other organization, then it is the organization that provides.
Factors that influences the supply of transport
There are numerous factors that have either indirect or direct effect on the supply of tourism. The factors that mostly affect the supply of transport are overall factors. These are environmental factors that the transport sectors have very minimal control over. They are natural and Technological factors such as; floods, change in climate, earth slides, and natural disasters. These factors differ from one area to the other and also on the climate condition or the area. A change in climate and its changes threatens the sustainability of countless activities of tourism, this extends as far as affecting transportation, particularly in rising countries, thus worsen transport within the affected areas and countries. The sector of transport is by now vigorously concerned with making necessary efforts, to reinforce adaptation measures. Variance in climate is by now affecting the sector of tourism, in particular the climate-sensitive destinations. Taking a study on islands, in minute island emerging states, that mostly depends on revenue of tourism for socio-economic growth, any little decrease in tourism considerably impacts levels of poverty. Increased heat frequency to extremes can make beaches in various areas to be unfavorable to tourists. Demand too affects the supply. An increase in the number of tourists will increase the demand for transport. This further depends ion the weather conditions. 16
The demand for tourist travel and trends in travel demand
)What demand for travel is about
The demand for transport is about the number that wants to travel to a specific area at a given time. The demand for transport depends on factors like the availability of transport systems and means. It also depends on the site to be toured.
16 from Atoll, S. (2009). Transport & Tourism: Global Perspectives. Publisher Trans-Atlantic and Otego, D. (2008). Tourism and transport, Toot publishers
There are some places that have higher demand than the others.
The number traveling as well changes depending on time and the intentions of tourists. If the number that wants to travel is low, then we can say that the demand is also low. These people travel form their dwelling places to the tourist’s sites. 17
) Who create Demand for tourism transport?
The creation of demand for transport is by Tourists. They provide the necessity to travel. Demand is only created when one wants to move from one area to the other and hence local residents cannot create it.
) Demand of transport characteristics
Demand of transport can be elastic and at times can be inelastic or constant. This is dependent on numerous factors and conditions. Tourism is characterized by high elasticity level. As costs of transport are important for global transport, demand is influenced powerfully by the fluctuations of cost and other cost related factors. For that reason, transport can be viewed as the key factor in the industry of tourism. The demand in worldwide and as well as public transport infrastructures means a great figure of people desire to travel in a fast, competent and in an economical manner. 18
The demand becomes elastic if and only if the desire for it is dependent on other factors like price and the likes. It is inelastic if it is inflexible and dependent.
) What affects the demand of transport?
The demand for transport is affected by the cost and the environmental factors. The demand also depends on the number of customers who want to travel to given destination at a given time.
17 From; Les, L. (2004). Tourism and transport: issues and agenda for the new millennium.Publisher Elsevier
18 from Chawla, R. (2000) Transport and Tourism, Somali Publications
It the number is Koki National park in Kenya from Canada is 20000 and those who want to travel to Kenyatta are 1000, then we can say that the demand for Kenyatta is higher as compared to Koki.
There comes a time that the number of tourist increase and at time the number to travel drops. This depends on the environmental factors from their respective dwelling places.
We find that when it is winter in the northern hemisphere, it becomes cold and the tourist travel to the southern hemisphere to sun bath. National factor may have influence but always they are very minimal and at times negligible. Factors like war and political instability rarely causes the tourists to migrate their countries. 19
6) Effects of transport expansion and innovation on global tourism trends
Expansion in transport sector and innovation on global tourism trends has led to the growth of tourism and improvements of the infrastructures. Tourists have the tendency of touring the areas that have better infrastructure and good services. Some of the effects are faster access to the destinations and better services. 20
Conclusion
Transport is the cause and the effect of the growth of tourism. To commence with, the enhanced travel amenities have enthused tourism, and the growth of tourism has inspired transport. The ease of accessing these services (tourism) is the main purpose behind the fundamentals of tourism transport. Though the two are affected by numerous external factors but their improvements are vital for both industries. For assessing the tourism areas the intended, travelers will apply any mode of transportation as long as the destination is reached and hence their satisfaction. All the sectors should work with one accord to promote tourism and travel.
19 and 20 From Atoll, S. (2009). Transport & Tourism: Global Perspectives.Publisher Trans-Atlantic
References
Atoll, S. (2009). Transport & Tourism: Global Perspectives.Publisher Trans-Atlantic.
Buda, D. (2001). Transport and leisure: report of the hundred and eleventh round table on
transport economics. Saga sag Publishers
Chawla, R. (2000). Transport and Tourism. Somali Publications.
Duval, D. (2007).Tourism and transport: modes, networks and flows.Publisher Channel View Publications.
European Union, (2009). Transport and tourism: practical guide. EUR-OP, 2009Publishers.
Gui, L. (2009). TRANSPORT AND TOURISM: Developing Gateways as Tourist Destinations.
Publisher LAP Lambert
Les, L. (2004). Tourism and transport: issues and agenda for the new millennium.Publisher Elsevier.
Otego, D. (2008). Tourism and transport, Toot publishers.
Transparency and its importance in corporate governance, case study of Enron
Transparency and its importance in corporate governance, case study of Enron
Organization leaders are charged with duties and responsibilities of emphasizing on transparency, integrity and honesty in the course of executing operations of management. The adoption of policies of this nature leads to prosperity while minimizing scandals which may ruin the confidence of stakeholders. The objectives of corporate governance in the organization are the increase in the level of transparency and this is important for organizations such as ENRON. However, the issue of transparency has been controversial. Most people are for the opinion that an extremely high level of transparency may become unambiguously good the the health of the organization. From the perspective of corporate governance, the high increase in transparency is associated with costs and also benefits at the same time. This brings about an optimal level above which an extra increase in transparency would culminate to low profits. Transparency plays a very crucial role in risk assessment for organizations such as ENRON. Through positive disclosure together with transparency, good governance in organizations is achieved. They lead to the demonstration of information quality in addition to reliability of financial and non- financial that the management should provide to the lenders, the shareholders and the general public (Bryce, 2008)
According to empirical evidence, high transparency rates significantly impacts on costs of capital. The supply of information in a reliable and timely manner results to a great level of confidence of important decision makers in the organization. This results to the formulation of good decisions for the interest of the business with a direct effect on the level of profitability and the general growth. The proper supply of needed information also influences decision makers from external of the entity. This means that the investors, the lenders and the shareholders are able to decide the risks that are associated with their ventures. In an organisation such as ENRON, the information that is provided is a good indicator to decision makers together with the outside interests of the extent that the organization has been able to comply with the legal requirements. Disclosure is very important to the understanding of the public about the activities of the company, their policies as well as performance in consideration of the environmental as well as the ethical standards in addition to the relationships that they have been able to develop with the communities around where the organization operates (Cruver, 2003).
Corporate governance practices in Enron case and the guidance in combine code of corporate governance
Corporate governance practices in Enron were associated with financial statements that were not transparent and therefore failed to account for the operations as well as the finances in as far as the shareholders and the analysts were concerned. The practices of corporate governance were also marked complex models of business in addition to unethical practices that led to the adoption accounting limitations in an attempt of misrepresenting the earnings together with modification of the balance sheet aimed at portraying performance depictions in a favourable way.
The scandals facing Enron were attributed to the steady accumulation of the values, habits as well as actions that arose way back and then proliferated beyond controllable levels. The primary motivations in the accounting along with the financial transactions at Enron were geared towards keeping of the reported income together with the reported cash flow at high levels, inflating the asset values together with off-booking the liabilities. All these issues combined contributed to the bankrupsy of Enron. Most of the problems were perpetuated by the executives of the company.
The compensation structure that was set in Enron together with the system of performance management was designed in a manner that could attract and retain the employees who were quite resourceful to the company. However the system setup also played a significant role in the dysfunctioning of the corporate culture in the organization. The setup had been infatuated with a short term focus of earnings for the purpose of maximizing on bonuses. The employees perceived at deals of high start volume while they disregarded the cash flow and profits quality for the purpose of coming at higher rating in the course of performance overview. Further to this there was an immediate recording of accounting results so that to be at par with the stock prices of the company. The intention of this practice was to cover the deal makers together with the executives who were given significantly huge cash bonuses in addition to stock options (Bryce, 2008).
The principle focus of the company was the stock prices with an extensive compensation of the management through the use of the stock prices. This led to the creation of expectations by the management which indicated rapid growth with the intentions of showing the appearance that the earnings reports would meet the expectations of Wall Street.
Before the fall of the company the tools of financial risk management that were applicable were seen to be appropriate. The issue of risk management in the company was seen to be very important based on the nature of regulatory environment that it operated under coupled with the business plan of the company. Commitments of long term nature had been established at Enron that required significant hedging for appropriate preparation for fluctuation which was inevitable in future due to the energy prices. The downfall of the company was attributed to the recklessness with regard to the application of derivatives together with the special purpose entities.
Through the hedging of the risks with the inherent special purpose entities, the company was in a position of retaining the risks that were allied to its transactions.
It was difficult to hide the aggressive practices of accounting at the company from board of directors. Although some of the improper practices of accounting were never known to the board, all the practices relied on the decisions that were deliberated by the board. In spite of the fact of extensive reliance on the use of derivatives in the company to transact its businesses, the Finance Committee of the company together with the board lacked a comprehensive background of the derivatives to understand what was actually communicated to them. If the board had gained a clear insight of the actual organization of the derivatives, then it could have been possible to prevent their use (Collins, 2006).
Principal-Agency problem.
In the context of economics, principal-agent problem has the implication of the difficulties that surrounds existing conditions associated with information that is incomplete in addition to being asymmetric at the time that an agent has been hired by the principle. There arises a need for the application of a variety of mechanisms in the course of aligning the interests of the two parties. The mechanisms have a link to attempts of motivating the agent towards the directions of meeting the needs of the principal. Such mechanisms may include offers of commissions or rates, sharing of profits, provision of efficient wages, posting of a bond by the agent, fear of being fired among others. The principal agent problem prevails in the situation of a relationship of an employee to the employer. A good example is the situation that stakeholders in corporations hire their top executives (Cruver, 2003).
Illustration:
Agency Theory Basic idea (P: Principal, A: Agent)
The issues of the principal-agent problem revolve around motivation of one of the parties to work for the interest of the other party. The compensation made by the principal to the agent for the purpose of encouraging the agent towards performing specific acts that will be beneficial to the principal while they are of cost to the agent is the core element of the principal agent theory. Some performance elements whose observation is costly are the duty of the agent but the beneficiary is the principal. This case applies to majority of the contracts that are agreed upon in the context of uncertainty, risk and information asymmetry (Cruver, 2003).
Importance of governance disclosure and what a company should disclose.
The senior executives in an organization have a duty of conducting themselves in honest and ethical manner particularly with regard to conflicting interests coupled with disclosure of financial reports. It is the duty of organizations to make clarifications of the roles together with the responsibilities of the board as well as the management so that the shareholders are provided with a significant level of responsibility and accountability. They are also supposed to implement some procedures while verifying independently along with safeguarding the integrity of financial reporting in the company. Disclosing the material matters relevant to the company should be done in a timely and balanced approach such that all interested investors conveniently accesses the factual information relating to the company (Collins, 2006).
Therefore the securities reports should disclose the following:
The shares that are held by the company for strategic purposes and the issues amounts on latest balance.
The amount of shares that are held by the company to achieve the realization capital gains
The role of corporate social responsibility and ethics in organisations
Corporate social responsibility applies to corporations across the board but corporations such as Enron whose businesses forge a naturally close interaction with the community are at an even greater need to form a relationship that builds upon their business. In modern way of doing business, the manner in which the affairs of businesses are run needs to take into consideration the thoughts, perceptions and aspirations of the societies in which they operate. The mage the public gets about a company or how the public perceives a corporation plays a major role in the success of a business because the consumers of the businesses’ products are the people. The politics between people and corporations determine success or failure and for this reason, the corporations need to build an image that makes them appear to be friendly neighbours of the community so to speak. Corporate social responsibility can therefore be defined as the policies or steps that a corporation takes to give back or to improve the communities in which they do business (Dharan & William, 2004).
The need for internal controls and risk management.
Internal controls and risk management in any organization are important features in any organization and they contribute significantly to the corporate governance of the institution. They also enhance the structure of internal control, the analysis of risk management and the process of financial reporting. The contributions of the editors in most organizations are to provide the services of consultancy together with assurance to the managers such that their companies are able to comply with the existing regulations. The resources of internal audit have in the past undergone expansion for the purpose of giving satisfaction to the high level of demand for the services in an attempt of assisting in the process of executive certifications with regard to internal controls together with financial reports (Collins, 2006).
Importance of cash flow information for both internal and external decisions.
The cash flow information, also called the cash flow statement, statement of cash flows or funds flow statement, is used in financial accounting is used as an indicator of the effects in cash and cash equivalents in the balance sheet accounts as well as income. It also breaks the analysis of operations, investments and the financing activities. It is ideally takes account of the cash flow in and out of the organization. The statement also serves in the capturing of the current results of operation together with the changes that are accompanied with the operations in as far as the balance sheet is concerned. Cash flow information is an important analytical tool for the purpose of the determination of the company’s viability on the short term and more so the ability of the company with regard to the payment of bills.
Importance of cash flow information for internal and external decision is to supply the needed information concerning the company’s financial position, the current performance together with the changes of the enterprise financial position. This information is essential for economic decision making for a wide array of users. For this reason, it is important to come up with cash flow information that can be easily understood and also relevant, comparable as well as reliable. It should reflect all the reported assets, equity, liabilities, expenses as well as incomes all having a close link to the financial position of the company (Collins, 2006).
The information should be understood by all readers who are equipped with reasonable business knowledge together with the economic activities and accounting with a positive will of analyzing the information in a diligent manner.
External and internal user needs which are satisfied by cash flow reporting
Cash flow reporting is needed by the owners and the managers of the organization for the purpose of making important decisions relating to their business. These decisions pose some significant effects on the continuation of the operations of the business. He cash flow reporting is then used during financial analysis to give the management a deep understanding of the figures reflected in the reports. The statements are also needed during the preparation of the annual reports by the management to be presented to the stockholders (Collins, 2006).
The employees of the company also require the use of these reports at the time that they make their agreements of collective bargaining with the company’s management. The labour unions and individual employees apply the reports to negotiate their promotion and compensation.
The reports are also used by prospective investors during their assessment of the viability of their intended investments in the company. The decisions for their investments are made after careful consideration of the reports that have been presented to them by professionals.
The reports are also resourceful to the financial institutions such as banks and the lending institutions. The decision of granting a company some working capital or extend the securities of debt and the expansion of finance solely depends on the reliability of the reports. The vendors who give some credit to the company also rely on the statements for the purpose of assessing the company’s creditworthiness. The media along with the general public have some interests in the reports for varied reasons (Collins, 2006).
The tax authorities in government also make use of these reports. They form the basis of determining the propriety together with the level of accuracy of taxes together with other related duties that have been declared payable from the company.
Is current cash flow information adequate for the above needs?
The current cash flow information adequate for the above needs is exposed with some loopholes. This is indicated by the fact that there is all possibilities that the reductions in equity account will lack a direct effect on the cash flow of Enron. However, there is also a possibility that the financial flexibility of the company may be impaired as a result of the decline in the equity value at Enron. The company is therefore left with the option of depending on debt to meet its future needs of finances. the financial flexibility of the company has continued to be on the decline leading to potential tracing of the confidence of the investor.
Bibliography
Bryce, R., 2008, Pipe Dreams: Greed, Ego, and the Death of Enron. PublicAffairs.
Collins, D., 2006, Behaving Badly: Ethical Lessons from Enron. Dog Ear Publishing, LLC.
Cruver, B., 2003, Anatomy of Greed: Telling the Unshredded Truth from Inside Enron. Basic Books.
Dharan, B. & William R. B., 2004, Enron: Corporate Fiascos and Their Implications. Foundation Press.