Question

Discuss and explain why is it important to monitor an organization’s cash flow?

Please use at least 130 words.

Answer 1

Cash flows is the financial statement which is used to record the cash inflows against cash outflows in specific time period.

Cash is the inherent part of the operations of an organisation as it is used to reflect the Overall Liquidity available for a business organisation.

Cash flows are very important in contemporary world as it reflects the free cash available for a company to pay off it's debts and service it's debt repayment schedule.

It is also important because free cash flows provides with an opportunity for the company to undertake new Investment as and when required because they have ample cash available.

One example of having free cash available is that it can help a company to buyback it's share if it feels that there is enough scope for appreciation of the shares and the company is currently undervalued.

So cash flows are important and they need to be monitored regularly.