Rebranding Red Apple Entertainment

http://franticfilms.com/news
(click on Red Apple Entertainment dated January 28, 2010)

Summary
Canada’s leading film and TV production company, Frantic Films, is rebranding Red Apple Entertainment, a Toronto-based production company which the company acquired in December 2008. This means that all operations in film, television commercials, and all branded content will now carry the Frantic Films name.

Connection
When rebranding Red Apple Entertainment, the cash flow statement was much more effective than the income statement in terms providing information for cash. What information am I talking about? Frantic Films needed to know one thing, and that is if they had enough cash to go through with this project. In the income statement, you will find revenue and expenses. However, revenue generated does not necessarily mean an inflow of cash. For example, when Frantic Films undergoes projects in film production, they are to generate revenue on a percentage of completion method because usually it takes years to finish a movie. Also, as they generate this revenue, it might be on credit, so Frantic Films might have earned revenue, but cash hasn’t even been collected yet. That’s the advantage cash flow statement has over income statement.

Reflection
Upon further research, Frantic Films is the company behind the computer-generated visual effects in films like Superman Returns and X2: X-Men United. It has also produced a number of lifestyle programs for the Life Network and History Channel. They were able to be successful because their initial goal was to grow the company out of cash flow and debt. What that means is when they undergo projects, they will have to increase debt to produce the project. Then, as soon as possible, pay off their debts with liquid cash. Because of their healthy cash flow statement, they are able to get more debt if they need to finance their growth. Having enough cash is the one most important factor when trying to borrow money from a bank. Banks want their money back, and if they know you will have enough cash inflow in the company, they will gladly lend money. Following that exact trend of borrowing money and paying the banks back asap, they have become the leading film and TV production company in Canada.