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1. In thinking through this question, one of my own clients came into mind right away. I wanted to share with you an example of the purpose financial statements serve, and illustrate that there is not a one-size-fits-all answer when reviewing financial data. In short, it is vital to analyze each clients situation individually and pay close attention to what each piece of information is telling about that specific business.

This clients situation involves net income and cash flow and is a company that most of us are familiar with. My client's name is Amazon.com - I have seen this client grow beyond the 13 years I worked with them. Growth in size including number of employees, variety of services and wealth. What I can tell you from day one of working with this organization is that their net income has never been as impressive as their cash flow. As a matter of fact, in 2012 and 2014, they reported a net loss for net income of (39M) and (241M) respectively. In more recent years, they reported positive net income of $10.07B and $11.59B in 2018 and 2019 respectively. However, how does the net income compare to cash flow? And, does it mean that Amazon.com is not a healthy or sustainable company? - Maybe or maybe not - What it does mean, is that in order to be successful in their operations and continuing to meet their obligations on debts and future continuous growth/innovation, they rely on the availability of cash inflows. I would dare to say that this is with good reason. Specifically, during the same period listed above Amazon.com reported net cash flows of $4.18B in 2012, $6.84B in 2014, $17.B in 2018 and $21.65B in 2019. You can see additional details on its financials under MarketWatch at: http://www.marketwatch.com/investing/stock/amzn/financials

What does this all mean? Well, in simple terms it means that a large amount of money comes in and out of Amazon.com every year and they do not keep as much of it in their bank accounts. Some argue that Amazon.com's cash flow figures are inflated due to their capital leases or that because they rely on so much technology, they are consistently having to depreciate a significant amount of technology equipment both of which impact net income.

In assuming that most of you are familiar with Amazon.com's products and services, given your own perception/experience of the company and the information I have shared here on its income and cashflow, how do feel about the financial health of the organization?

2. It is safe to say that many of the finance and accounting functions overlap. Specially in smaller businesses. We had some great discussions about this topic in an earlier week and on this post, I will focus on how Financial Managers interact with other areas of a firm. Later in the week, I will focus on the accountants interactions with other business areas. Finally, by the end of the week, we will be able to clearly draw on the similarities and differences between the two.

To illustrate this, lets use an example. The situation is that your company is deciding on a new product or service it wants to offer clients. To make the decision on whether this new product or service can be approved, the Financial Manager will need to evaluate the following:

• From the Marketing Department The Financial Manager needs to review sales forecasts, price guidelines and advertising budgets.
• From the Economic Department The Financial Manager will need to understand the supply and demand analysis, profit-maximizing strategy and how different levels of economic activity will affect the new product or service.
• From the Accounting Department The Financial Manager will need to partner in the production of financial reports, assessment of the firms financial position and compliance with all required filings. This way, the Financial Manager can assess the flow of cash through the business from the new project.

As you can see from what I listed above, the Financial Manager is concerned with cash flow. They need to know how much money will be coming in as a result of a new product/services. They also need to know how much the firm will need spend to successfully launch the product/service. And finally, they need to understand the risks associated with the new project so they know how to prevent or mitigate them.

Can you think of anything else the Financial Manager needs to be aware of when making a financial decision?