Cash Flow Analysis Paper

Change in Estimated Warranty
Warranty is the guarantee provided by the seller when a consumer makes the purchase of goods or services. Federal law makes it mandatory for sellers to make warranties available to read for buyers before buying the products and services (Warranties, n.d.). Warranties are realistic promises that can be acted through legal action and they work as pre-sale statements to attract more sales volume. Warranties will be provided for limited time of the purchase (Warranty Accounting, n.d.). When software of Greyhound Gamers are not able to perform well, contain a lot of bugs, or not giving the accurate data as they are promised, customers can ask for repair or exchange of such software or rectify the problem as originally
1) Warranty consists of estimated expenses. Without sales, warranty expenses do not occur. Reduction in warranties will reduce the sales dramatically and also the cash inflow. 2) Reduction in warranty expense might reduce the expenses as whole but it will increase the net income of the company with tax expenses. Taxes are always paid in cash so reduction in warranty expense will increase company’s cash outflow. 3) Company might need to provide better gaming software immediately as replacements to consumers. But with limited warranty expense it might not be possible to cover the replacement
But as explained, those changes are only good for the initial years. The initial net income looks really good but the consequences of those changes are more harmful than constructive for the company in later years. The company has lesser cash inflow, higher tax payments, higher bonus for newly appointed president which is not beneficial for company from any stand point. The company does not even have the enough cash or liquidity. The future mobility of company is at stake. The decisions made by president might not increase the market value of the company. The proposed changes will not increase the capital gain or price of the firm’s