Question

Why is cash flow so important?

Answer 1

Cash flow is important as:

1.It depicts the amount of money that will come into a business and the amount that will go out.

2.It shows the inflows as well as outflows of cash.

3.It helps a business in analysis of its financial ,operating as well as investing activities.

4.It helps a business in determining the cash position of a business.

5.It helps a business in determination of optimum level of cash as well helps in determining the working capital needed.

6.It helps in short term as well as long term planning as it provides the information about cash inflows and outflows in the long run as well as in short run.

7.It helps in comparing the actual results of cash flows with the projected cash flows.