Madison Square Garden Company

A cash flow statement refers to a document which presents a snapshot of money either coming in or out of the businesss budget. Therefore, it can be used as a tool for predicting future cash flows based on previous spending of the company and its income. Every business entity strives in generating more cash for its operation than what it spends. A cash flow statement, thus, depicts the major components of income that is flowing in the business and also presents detailed expenses that flow out of the business each month. It can be said that a business has a positive cash flow when its statement portrays that there is more income than expenses. Having a positive cash flow is important for any business entity because it shows that such company is in a good position of reducing its debts, acquiring more assets and even acquiring another company as well. Cash is a driving factor of successful business conduct and, hence, a positive cash flow makes a company to be perceived as a strong business in the eyes of an investor or a stockholder (Lornas, 2012).

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For a sports entity like Madison Square Garden Company, positive cash flow statements are an important indicator of the effective performance because they communicate all activities of the sports entity that take place through the use of cash. Such activities include all payments that the sports entity makes to other people and the money that is received. In order to manage the sports entitys cash position, it is crucial to understand the importance or need of reporting positive or encouraging cash flows (Plunkett, 2009).

Madison Square Garden is a company located in New York, America that deals with entrainment promotion. The company has various divisions, including MSG Sports division which manages the professional teams of the company which include the AHL Connecticut Hockey teams, NHL New York Rangers, New York Liberty Basket ball teams and New York Knicks. Some of the additional measures which Madison Square Garden Company can take in order to rectify any difficulties in its cash flow include positioning the strength and breadth of their brands and assets in order to have value for its stakeholders and ensure long-term growth. The revenues for MSG sports for the fiscal year 2012 grew by 17 % compared to the previous year, while the Adjusted Operating Cash Flow (AOCF) totaled to $28.7 million increased by a margin of $21.7 million. In order to rectify any difficulties in cash flows, Madison Square Garden Company used AOCF as a relevant measure for evaluation of the companys operating performance of its business segments on a consolidated ground. AOCF and revenues, therefore, are used as relevant measures and indicators to evaluate the effectiveness of the management and overall business management (Ferguson, 2008).

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In order to rectify any cash flow difficulties, Madison Square Garden sports can carry out a series of layoffs to ensure that the problems are rectified immediately to help it generate positive cash flows in subsequent periods. In addition, Madison Square Garden sports should speed up its cash flow by sending out its invoices in advance as soon as jobs are completed and the products or services are delivered. Madison Square Garden sports should also evaluate its prices. Thus, if it charging same prices like it was charging four or 5 years ago, then there is need to raise its prices. By raising its prices, more cash will come in, hence, cushioning on the hard times that take place during over slow or late payments. Another way Madison Square Garden sports can rectify its cash flow difficulties is by seeking clients who will put the retainer. This will ensure that the company is guaranteed of some amount each month (Ingram, et al.2006).

To avoid cash flow problems, Madison Square Garden sports should also accept credit cards from its clients and make a variety of purchases using such credit cards. Instead of billing customers, they should advise them to use credit charges instead of waiting for more than 30 days to get payments from them. This will save the time and money spent on billing customers through sending out monthly statements. The speeding up of cash flows can help Madison Square Garden sports to speed up payments to its creditors, thus, eliminating or lowering interest payments made on the payables.

Funding of cash flows can come from various sources, but mainly through investing, operating or financing. Through operating funds, Madison Square Garden sports can earn money through provision of services or goods to the market. Through investments, Madison Square Garden sports can expand its capital without necessarily having any operating expense. Through provision of finance, Madison Square Garden sports can earn good money through lending the money. As a result, all of these sources of funding will lead to the improvement of the cash flows for the company. However, the achievement of cash flow is expensive for most companies and, therefore, a firm must first provide goods or services, pay workers and market goods or services to the general public. However, for investment cash flow, Madison Square Garden sports can simply incur few transaction fees so as to achieve earnings. Companies having greater financing and investment like Madison Square Garden sports will have lower expenses, thus, ultimately leading to an increase in profits (Plunkett, 2008).

In conclusion, cash flow can be compared to the trade balance which may be either negative or positive, just like a nations trade balance. Paying out more than what a company is paid results in a negative balance while being paid more than what a company paid out results in a positive cash flow. Even though having a positive cash flow has become a definite goal for most companies, it cannot be used as a measure of profit.

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