Question

In the Chapter, they mention the idea of strategizing around your cash flows. Why are cash flows an extremly important part of a company's strategy process? What implications does it have?

Answer 1

Why are cash flows an extremly important part of a company's strategy process?

• Cash Flow helps a company understanding where its money went during the tenure
• Cash Flow helps in focusing on creating excess cash
• Cash flow statements often provide better Key Performance Indicators than profit and loss statements
• Cash flow statements help with financing decisions

What implications does it have?

• It implies the flow of funds within a company
• Cash inflow comes from sales, interest income, capital contributions and borrowed funds
• Cash outflow is generated by your expenses on materials purchases, employee salaries, equipment purchases and debt repayments.