Know Your Cash Flow

By | June 5, 2014

financial managementThe term cash flow has been too often heard in every conversation that is business oriented. Start of those roadside businesses, retail trade, business hawkers until they were driven from the building skyscrapers flashy always talk about cash flow. Whatever the business, cash flow key. So, what is called the cash flow?

Cash flows arguably fancy term in the business world. Whatever type of business, you may not be separated from cash flow problems.

Once you start talking about business, it is almost impossible not to talk cash flow. He is very strategic, play a vital role in the activities or operations of the company. Even in households even though the individual level, a cash flow problem does not escape from the subject of conversation.

At the individual level, for example. When the calendar is already showing the old date, a lot of people who complain pocket thin, tight, drag, or a variety of other terms that describe how the money is held in the hand’ve lived a little, while spending to meet the needs can not be stopped.

People who like this have problems in managing personal cash flow or its cash flows. Clever people manage cash flow she always count when the money should come out and what the expenses are incurred.

If need be postponed, so he does not need to spend money to buy the current needs. By doing so, its cash flow is always maintained and the main needs can be met.

Addition of expenditure is only done if there is additional income, so between spending and revenue is always maintained in a stable condition or healthy.

Well, about the pattern of financial management as well and it certainly applied in households, firms, or organizations that pay attention to continuity or sustainability. For companies, let alone that has the status of a public company, cash flow is very important.

Once the importance of cash flow, a businessman likened the cash flow is king in the company, not the CEO or board of directors or board of Commissioners. The reason is simple, cash flow was the one who determined the course of the company, life and death of the company, not the CEO, directors and commissioners.

If there is no cash flow, directors will not be able to do anything. Smart as any CEO or board of directors, and any sophisticated planning and expansion will be done, if it is not supported by healthy cash flow then all that means nothing.

Therefore, in connection with the 2010 publication of the issuer’s financial statements ended 31 March, should concern investors or market participants do not just drawn to the classic problems such as balance sheet and income statement.

Two things that are important in the financial statements, but it is also very important to note is the problem of a cash flow statement. Cash flow is the part that should not be missed.

Why? A frequent mistake is the belief or assumption that if the revenue and profit rose or rose nice, firm performance also shines. Such an assumption is sometimes like trap of thinking a lot of people.

Therefore, the increase in revenue and profit does not necessarily indicate a good cash flow conditions. There is a company in terms of balance sheet and income statement good, it turns out its cash flow sag, dry.

Cash flow for a company is like energy. The smaller the stored energy means that the limited mobility of the company. Furthermore you can imagine, what can be done by a company whose energy is limited? Want to capital expenditure can not, and it would also not be able to.

If the cash flow condition is not managed properly, a company like this has had its day. Well, you certainly do not want to buy shares of companies like this do not you? Therefore in the analysis of financial statements, do not forget to consider the company’s cash flow.