Skip to main content

Cash flow, its contents and How it’s necessary for business success.


Definition=

The flow of cash (the cash also includes cash equivalent items i.e. treasury bills, money market funds, investment in shares for three months etc.) inside and outside of the business is known as cash flow  and the statement which shows inflow and outflow of business cash is called statement of cash flow.

Contents=

  • The cash flow contents includes business activities like operating activities, investing activities, financing activities. Now the question could be raised in mind that how these activities affects cash flows in answer to the question the following points may be considered:
  • The cash flow inside or outside which is because of operating activities can affect the net income of the business.
  • The cash flow inside or outside which is because of investing activities can affect the non-current assets of the business. And
  • The inflow and outflow of the cash because of financing activities can affect the equities and debts of the business.

Importance of cash flow=

  • For every business it is very necessary to keep an eye on where from cash is coming and where it is being investing and how effectively business is managing finance required in order to keep the business successful.
  • Cash flow is important because it provides the detail about inflow and outflow which helps in making decisions.
  • It helps the business to deal with outstanding debts on time.
  • It tells you about if your cash inflow is more than its outflow than its positive cash flow otherwise its negative cash flow.
  • It provides the detail of positive and negative cash flow after which management take actions to avoid negative cash flows.
  • Cash flow is widely used to measure company’s strength.
  • Investor also takes a view of cash flow of the company before investing.


Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

Difference between Downsizing and Reengineering with real life example

Explain difference between Downsizing and Re-engineering with real life example? Downsizing = Downsizing is used to reduce the size in order to improve its financial performance, usually by laying off employees.Businesses use several techniques in downsizing, including providing incentives to take early retirement and transfer to subsidiary companies, but the most common technique is to simply terminate the employment of a certain number of people. Downsizing often takes place as part of a larger restructuring program at a company. Although it's usually thought of as a strategy companies use to become smaller, downsizing can also be the result of company mergers, acquisitions, and takeovers.Its most common form comes in employee layoffs, which reduce payroll costs for the company. Downsizing may also involve shuttering some operations or offering certain employees early retirement. Downsizing is typically seen during economic downturns in order to improve efficienc...
5 comments
Read more

What are the Crosby’s 14 Steps Work.

The 14 Steps of Crosby are following. 1. Management Commitment= It is necessary to consistently produce quality products and services at the optimum price. This commitment must also be transparent to all employees for the prevention of defects in all the operating departments. 2. Improved Quality= Search for team members who will model quality improvement commitment, every function of an operation must contributes to defect levels, every function must participate in the quality improvement effort . The quality improvement team should be able to effectively commit themselves to improvement of quality. 3. Measuring the Quality= Firstly you have to know exactly where your products and services lie when it comes to conforming to requirements. Thus, the third step on Crosby's list is to measure quality. Determine where there is room for improvement and where potential for improvement exists. 4. Cost of Quality= Explain how the cost of quality figures into the overal...
1 comment
Read more

Discuss national income and Gross domestic product effect on national income.

Discuss national income and Gross domestic product effect on national income. Before we start to explain let’s take a look on closed and open economy In a closed economy, all output is sold domestically, and expenditure is divided into three components: consumption, investment, and government purchases. Y = C + I + G In this equation Y is the total output, C is the total consumption, I is the total investment and G is the total government expenditure. In an open economy, some output is sold domestically and some are exported abroad.                                                                   Y = C + I + G + NX In the above equation each word stands for is following: Consumption (C) Investment (I) Government Purchases (G) Net Exports (NX) Consumption : The spending by households on goods and services, with the exc...
Post a Comment
Read more