Consider the following key facts and findings about Cash flow - stated by CEOs, Business owners & Analysts in Metadata analysis. This holds good for companies of all sizes, and cuts across industries and sectors.
Cash flow is the inflow and outflow of money from a business. It is necessary in general to manage operating costs. Positive cash flow indicates that a company’s’ liquid assets are increasing, which enables it to reinvest free cash flow in its business, besides providing a buffer against future financial challenges. Negative cash flow indicates that a company's liquid assets are decreasing.
The cash flow statement is believed to be the most intuitive of all the budget summaries since it follows the money made by the business in three primary ways—through operations, investment, and financing. The sum of these three segments is known as net cash flow.
Why so much fuss about Cashflow? It’s enough if companies manage to achieve profitable revenue growth, right?
Consider the following:
Cash Flow Statement helps the management to ascertain the liquidity and profitability position of businesses.
It is possible for businesses to verify the idle and/or excess and/or shortage of cash position if capital cash balance is determined.
If the Cash Flow Statement is properly prepared, it becomes easy for business to manage the cash. The management can prepare an estimate about future plans.
Cash Flow Statement helps the management to understand how much funds are needed and for what purposes, how much cash is generated from internal sources, how much cash can be procured from outside the business. It also helps to prepare cash budgets
Though Cash flow is the key success factor, it should not be considered in isolation, and holistic Approach with the overall objective of the company need to the backdrop. The following are few pointers in order to achieve the said objective:
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