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Evaluate the importance of cash flow to a business.

Analyse sectorielle : Evaluate the importance of cash flow to a business.. Recherche parmi 298 000+ dissertations

Par   •  7 Décembre 2016  •  Analyse sectorielle  •  268 Mots (2 Pages)  •  827 Vues

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4. Evaluate the importance of cash flow to a business. 

First at all, cash flow is of vital importance to the health of a business. One saying is :" revenue is vanity, cash flow is sanity, but cash is king".

The improtance is that the cash flow can keep the business going on. As all we know, there are many companies can continue their business even if they are making a loss. The resource who support the business is cash. So we can find one of the improtance of cash flow.

Then, in the process of business, sometimes we recive less cash than we spended. In this situation, we hold the receivables, and we should pay our debts to Suppliers. The solution is that we borrow money to pay for it, but the loans have interest, or If we have enough cash to support us to pay for our suppliers. We can make our company's normal operation.

Cash flow is always important when it is not easy to obtain credit. Because if we can't have the loans. The cashflow became the main way to keep our business going on.

How a recession would most likely affect this business:

When the economy is in recession, financial service provider are reluctant to lend money. The interest rates also will increase to avoid the risk of borrower not paying back loans.

According to the recession, we can observe some impacts to the business : the most of company's cash flow which will have a capital shortage, at the same time the second impact is difficult to start some new projects, although these projects is very rewarding.

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