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Importance of Cash Flow

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  • Importance of Cash Flow

    Importance of Cash Flow

    There is a significant importance of cash flow to a business. Cash flow as defined above, is the inflow and outflow of cash or liquidized finances. The following are some advantages of inward and outward flow of cash.

    * Income Assurance: The biggest importance of cash flow is that the business organization tends to have an assured income irrespective of the outside economic condition. Many business corporations have a very well balanced and uniform inward and outward cash flow.
    * Ensures Timely Payment: The uniform and assured cash flow, in both the directions, ensures two principal payments, namely, the salaries of employees are paid on time and installments of all loans are made on time. This safeguards the trust of employees and upholds the credit rating.
    * Return Ratio: The analysis of cash flow ensures that the business is not investing finances in the wrong avenues, and investments already made are paying off well. This ratio is often termed as return over asset ratio.
    * Keeps You Out of Debt: The timely cash inflow plays a very instrumental role in keeping you out of debt, as a timely inflow of cash prevents you from taking small loans.
    * Saves Unnecessary Expenditure: The use of inward and outward cash flow, prevents all unnecessary expenditure such as piled up interest, late payment charges, etc.
    * Timely Investments: As the inflow and outflow of cash is on time, you are left with adequate free and liquid finances, which you may invest in time bound instruments and securities.
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  • #2
    Re: Importance of Cash Flow

    Importance of cash flow can be summarized in a very simple manner, by comparing it with a balance scale. When we measure anything with a balance scale, we immediately realize the comparative differences between the heavier and lighter. These kinds of flows can be put down into what is known as cash flow statement, which is like a balance scale. This statement that shows the inward and outward balances, helps us to locate unnecessary expenditures, and income that is due but not received.
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    • #3
      Re: Importance of Cash Flow

      Thank you all guys for sharing this great information..!
      It's very useful information regarding my business, I need to know this.. keep sharing!!!
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      • #4
        Re: Importance of Cash Flow

        Hey i liked all the tips and points added on cash flow..
        i would always make a point to be alerted about it..
        thanks for adding out a great information on the topic..
        thanks.
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        • #5
          Re: Importance of Cash Flow

          Cash flow is a any affectionate of assets or expenditure, that affects the cash accounts. It have to be acclaimed that entering cash flow does not cover abounding incomes such as a acclaim auction of appurtenances or assets due but not received. A cash flow have to be strictly, financially aqueous cash or affairs that can be stored in a coffer annual or in the anatomy of currency.
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          • #6
            Re: Importance of Cash Flow

            One of the central goals of any type of business is to maintain a positive money flow. This is fundamentally a state where the money receipts exceed the money payments consistently over the coursework of a given period. The process production of net profit is thought about to be a basic indicator of financial health. Often, monitoring money flow can help to identify potential issues that threaten to turn a positive money flow in to a negative before this actually takes place.
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            • #7
              Re: Importance of Cash Flow

              Cash flow are important for the business. It really very sanity of the whilst and better inflow of the important sales. The business making the right deal with enough survive of the costs. The services of the positive cash flow is enable of the growth.
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              • #8
                Re: Importance of Cash Flow

                Along with balance sheets, income statements, and statements of shareholders' equity, cash flow statements represent the main financial statements a business produces. You can calculate a business's cash flow using a standard formula.
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                • #9
                  Re: Importance of Cash Flow

                  Cash flow is a inbound and outbound of money or cash that's can help to manage financial issues and get the profit rate of business. A good cash flow is a very important for every business because it can help to find out the unnecessary finance of business and handle business finance regarding matters in an effective way.
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                  • #10
                    Re: Importance of Cash Flow

                    Cash flow is the core concept of any small business, irrespective of its size.
                    Typically, cash comes from sales of products and services, receivables payments and the sale of business assets. The principal aim of keeping a good going cash flow is to have available cash in hand which prevents you from approaching banks for credit facilities.
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                    • #11
                      Re: Importance of Cash Flow

                      Great discussion! Cash flow is the sum of money coming into and getting out of a business. This helps businesses to get Organized and plan, help to improve incoming Cash Flow, help yo pay your bills in a smarter way and survive in the lean months.
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                      • #12
                        Cash flow make your payment deal easier, it became easy pay your expenses. Everything related to accounting will be synchronized.
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