The Importance Of Cash Flow In Business

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h flow according to the business dictionary refers to the incoming and outgoing of cash representing the operating activities of an organization. In accounting cash flow is seen as the difference in amount of cash available at the beginning of a period (opening cash balance) and the amount at the end of that period (closing balance). Cash flow in its narrow sense refers to the virtual movement of money. Cash flow can either be positive or negative. Positive (when the closing balance is higher than opening balance).and negative when the opening balance is higher than the closing balance. Cash flow can be increased by Selling more goods and services Increasing the selling price Paying slowly ( to creditors) Taking a loan Collecting faster…show more content…
i.e high level of cash flow does not mean the firm is growing or low level of cash flow does not mean a negative growth. Michael, (2013) carried out a research using a sample of forty different countries to find the relationship between cash flow and growth of firms. He emphatically stated that there is a statistical significance and positive relationship between firm level of cash flow and growth. Joe (2012) stated that earnings dividend and growth rate are useful figures in investment analysis. However, just as water is to human, there is an underlying element essential to the survival of any firm.(cash flow). Cash flow is the life blood of any business, particularly for small enterprise and startups, its easy to get hung up on profit but there is great danger of business owners not putting 0enough focus in place can aid one to foresee potential problems which may arise in the year ahead and it can help business make important decision about the future. To be a little more simple, business need cash flow in other to keep themselves solvent. 2.3.5. MERGERS AND ACQUISITION AS A GRIWTH AND SURVIVAL…show more content…
It also helps in propelling the entire economy of a nation. Therefore, it requires repositioning in order to enable efficient financial performance Okapanachi (2011). Bank may have to grow and survive and the one best way of doing this is through merging with each other or acquire one another. Before the consolidation in the Nigerian banking industry in 2004, there were not less than 89 banks in operation of which most of them were undercapitalized, there were ceases of gross insider abuse such as granting of unsecured loans to directors and top managers of these banks. They had so many branches scattered all over both the rural and urban area but a good number of them were not functioning successfully because there were operating at a loss and there by putting themselves inn chronic distress and bad
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