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Money (Cash) Is More Valuable Than Any
Other Form Of Investment Tool
• Finance is the study of how people allocate their assets
• A key point in finance, which affects decisions, is the
time value of money
• a unit of currency today is worth more than the same unit
of currency tomorrow.
The "cash is king" phrase refers to the ability of a business to have
enough cash on hand to cover short-term operations, buy assets such as
equipment and machinery, or acquire other facilities.
More businesses fail for lack of cash flow than for lack of profit.
If CASH IS KING then cash flow is the blood that keeps the heart of the kingdom pumping.
Cash is the paramount for running a business. And Cash flow is one of the most critical components of
success for a small or mid-sized business.
Firms that don't exercise good cash management may not be able to make the investments needed to
compete, or they may have to pay more to borrow money to function.
What is my cash balance right now?
What do I expect my cash balance to be six months from now?
Track your cash flow results every month to determine if your
management is creating the type of cash flow your business needs.
“ Involves the collection, handling, and
managing usage of cash”
Why IS IT IMPORTANT ?
• Sufficient cash during peak time
• Planning capital expenditure projects
• Invest surplus cash
• Advantage of discount
CONSEQUENCES IF YOU FAIL TO MANAGE
CASH IN THE RIGHT WAY
• Not able to invest
• Loans with
TIPS FOR EFFECTIVE CASH FLOW
• Review Receivables
• Offer Prompt Discounts
• Push Payables
• Pay your suppliers on
Understanding and managing
cash flow is of chief
Customers are likely to pay
their bills more slowly
Sales and profitability will
Banks are less inclined to
lend against insufficient or
Liquidity can become
constrained very rapidly.
Undertake a critical analysis
of your business operations
Understand the resulting
impact on liquidity
Build and conserve cash
Forecast near-term cash
receipts and cash
Reduce inventory levels
Replenish on a just-in-time
basis, to the extent practical
Sell aged inventory
Growth consumes cash
A significant sales or expansion
opportunity that appears
profitable may lead in dire
An increase in the duration of the
cash conversion cycle is a
Consider the implications to cash
flow from increased sales
requiring capital expenditures
and ramp-up periods
Understand the worst-case
"Growing your business puts a huge strain on cash," "You almost
always have to make investments and bring certain expenses on ahead
of achieving the higher revenue and cash flow that comes with
Insufficient cash is one of the main reasons for small business
You really need to structure your business to have a positive cash
flow if you want your business to grow and increase profits.