Cash Flow
For your business to thrive it’s important to develop your financial knowledge and skills. Having a financial adviser is a good start but knowing about cash flow and budgeting will help you when making those important business decisions.
What is Cash Flow
Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for the stakeholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow.
A cash flow statement can be one of the most important tools in managing your finances.
Components of Cash Flow Statement
Assessing the amounts, timing and uncertainty of cash flows is one of the most basic objectives of financial reporting. Understanding the cash flow statement – which reports operating cash flow, investing cash flow and financing cash flow — is essential for assessing a company’s liquidity, flexibility and overall financial performance.
Importance of Cashflow
Even profitable companies can fail if operating activities do not generate enough cash to stay liquid.
The importance of the cashflow statement is that it allows us to rapidly know the company’s liquidity, delivering key information that helps make the following decisions:
How much inventory can we buy?
Can we purchase in cash or is it necessary to request credit?
Should we collect in cash or can we grant credit?
Can we pay off debts when due or must we ask for refinancing?
Can we invest the surplus of money in new financial instruments or projects?
Can we expand our business to new market?
Can we invest in new R & D activities and develop new products for existing and new markets?
How CFOLead can help you:
We at CFOLead will help you in developing the strategies required for managing your cashflows. With the help of various tools, we will analyse your cash positions by applying various scenarios and assumptions and advise you on the optimal solutions. Creating a cash flow analysis might seem intimidating at first, but once you’ve done it a few times, you’ll wonder how you ever ran your business without it.
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