Cash Flow Analysis Business And Finance Homework Help (1)


Cash Flow Analysis

After reading Chapter 4: “Statements of Cash Flow& Analysis of Ratios,” along with any other research conducted, pleasediscuss why comprehending and managing cash flow is important for financialsuccess.

Student1 Reply

Good summary. You accurately stated the true value ofcash flow. Without cash flow a business cannot survive long. Even with cashflow if is not timely or the right kind a business still may not survive. Asyou stated understanding cash flow is critical for business success. Ofthe three components of cash flow activities which one do you believe will bethe most important for your identified business?

Student2 Reply

Hello Class and Professor, 

  Comprehending cash flow simply means to understand what exactly cashflow means. The definition of cash flow is the movement of cash into and out ofthe business.  Cash coming in can be payments for goods and services bycustomers, lenders, and investors. Cash out is referring to bills being paid,salaries, suppliers, and creditors. Having this basic understanding will help abusiness manage its cash flow more efficiently. It is near impossible to managesomething that you do not know anything about.

  In order to improve cash flow management, a business should have adetailed analysis of how the business is operating. The analysis should take anin-depth look at accounts receivable, accounts payable, credit terms, andinventory.  This detailed view will allow the company to see if anyimbalances are taking place. From this analysis the company will be able tolook at ways to improve its cash flow management system (Managing CashFlow for Small Businesses).

  The better understanding a company has about its financials, the betterdecisions the company can make. They will be able to look to the future foradditional growth. They can try and reduce their liabilities to generate betterreturns.  Conducting cash flow analysis will allow a company to take thenecessary steps needed to make improvements in their in and out. 


Managing Cash Flow for Small Businesses. 

Peavler, R. (n.d.). What is Cash Flow? ADescription of Cash Flow.

Student3 Reply

Professor and class,

Cash is ready money in the bank or in the business.Cash flow refers to the movement of cash in and out of a business. If you takein more cash than you send out, you have a positive cash flow. You have anegative cash flow if you have more cash going out than coming in.  Cashflow basically means “Do I have enough cash flowing through my bank account tocover my current and future expenses?” 

Cash flow is a good indicator of the financial healthof a company. We all know the expression “cash is king.” Cash flow isdifferent from your cash position. Having cash on hand is critical, but cashflow indicates an ongoing ability to generate and use cash. 

From an operations standpoint, cash flows into thebusiness from the receipt of payments from customers. Cash flows out frompayments for material, labor, and overhead. Being profitable does notnecessarily mean being liquid. A company can fail because of a lack of casheven when it is profitable (Boundless).

When you borrow money you use future cash flow to makeyour payments. So it makes good sense to have a positive future cash flow topay your debts. It is not uncommon for companies to have long-term loans and/orshort-term credit accounts with vendors which may require monthly payments orsome larger payment at a future point in time. Operating any business intoday’s economic environment means managing cash flow because in today’seconomic climate, short term operational loans are not as easy to get as theymight have been.


The Importance of Cash Management – FindLaw. (n.d.).Retrieved July 20, 2016, from

The Importance of Cash Management – Building Blocks 4Business. (n.d.). Retrieved July 20, 2016, from

Importance of Cash Flow Accounting – Boundless OpenTextbook. (n.d.). Retrieved July 20, 2016, from

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