Question

Cash flow management is one of the most important aspects of financial management. Why?

Answer 1

Cash flow management is an important aspect of financial management. Having excessive cash creates an opportunity cost for the company which can increase the cost of funds and make the business unprofitable. Careful cash flow management allows a company to have sufficient cash on hand to avoid a shortfall or surplus cash. The interest cost can be kept to a minimum if cash flows are managed adequately. Cash flow management also allows the company to avoid defaults on its payments due.