Question

1. Define what is a cash flow statement.

2. Define leverage.

3)Fast Growing companies have a big apetite for cash. Managers follow 3-key rules in the textbook that can aid in a company's cash flow . What are they?
3.
4.
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6.What are the steps of the "cash flow cycle" (5pts.)

Answer 1

Ans 1) Cash flow statement tell how company is generating cash for its business it is mainly divided into three parts cash flow from operating income, cash flow from investing activity and cash flow from financing activity. Most important element in cash flow statement is cash flow from operating activity because it tells that the company is making enough cash to carry its day to day business and generating cash via its daily operation and business rather from other sources.

Ans 2) Leverage is the amount borrowed from lender or other source, debt is a kind of leverage taken by many firm. Leverage is double edge sword because during good time it will increase the return of the firm but once the situation is bad then the leverage will kill the firm or its business. One need to be very careful while using leverage.