Cash flow and financial analysis
Cash inflow is the business lifeblood and originates from sources like customer payments, loan receipts, monetary infusion, or investments. Cahs flow gives the company high flexibility in reacting to dilemmas and making critical decisions. Confidence found in cash flow allows for the essential purchases, and the bond in a company is reinforced. Cahs flow also makes the company appealing to a lender if the company desires new debt.
Along with debt management, when cash flow is steady, there is comfortability and the ability of the business to invest. Making new location research investments, infrastructure renovation, technology improvement are some of the ways an organization can develop with adequate cash flow. This indication cash flow when positive there are various opportunities which organization can grab and make best for its development. Been in a position of cash flow in excess assists the organization in undertaking activities in a proactive, strategic rather than defensive and reactive way. Therefore, cash flow plays a significant role in any organization.
Reply 2
Financial analysis entails the assessment of the stability, viability, and profitability of the company. Its undertaken by professionals who make reports applying ratios that make the importance of the information taken. Form the financial statements like cash flow. If the company anticipates feeling good about the company’s financial productivity, the cash flow plays a significant role. Also, looking at balance sheets and income statements, basic crunching can offer Important about the organization. However, it should be noted that cash flows not like profits. Profits can be derived after matching costs and revenues, whereas cash flows happen when money is spent or received. Profit can show if the company has improved its performance, but there are some things which profit dont let people know. Cash flow will enable the organization to know about what generated the profits, how the benefits will be used, and how to make excess profits to ake company better. Therefore, profits and cash flow are essential to the organization but play different roles in the running of the company.
Reply 3
Financial analysis plays an essential role in the organization to enhance the performance of the company at large. Financial analysis concepts like cash flow statements and income statements can be applied in various sectors in organizations. Cash flow statements help companies expand, grow new products and services, reduce debt, and pay dividends. That’s the reason why most organizations value cash flow statements compared to other financial reports. The organizations need to make sure that the cash flow is favorable to avoid issues like borrowing money. However, negative cash flow not a bad thing to some extent. If an organization is a net spender for cash because it’s creating a second manufacturing plant, for instance, this could pay at long last if the plant gives more money at the end. Income statement in a company shows the expenses and revenues of the company during a specific time. It shows ways in which revenue is changed into net profit or net income.
References
Al-ahdal, W., Alsamhi, M., Tabash, M., & Farhan, N. (2020). The impact of corporate governance on financial performance of Indian and GCC listed firms: An empirical investigation. Research In International Business And Finance, 51, 101083. doi: 10.1016/j.ribaf.2019.101083