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The Importance of Cash Flow to Businesses

In the normal course of business, cash comes in as income and goes out as expense. This flow of receiving and spending cash for commercial purposes is known as the cash flow. Since the core objective of any business is to generate profit, the flow of cash is important as it directly affects the bottomline of the company.Uses Of Cash FlowCash flow is used:to evaluate the liquidity of a companyto find out ratios like the net present value and the internal rate of returnto act as a validating input for net income created by accrual accounting methodsTypes Of Cash FlowCash flow can be:operational cash flow (the flow of cash for normal operation of the business)financing cash flow (the flow of cash for… Continue reading