If you want your business to be as healthy as possible, it’s imperative to have an adequate amount of cash in the drawer (or the bank account). Irrespective of what assets your business owns, it’s always the cash that keeps your operations running.
What is cash flow?
A cash flow statement is one of the most important financial statements that your business will need to keep track of its finances. The primary aim of a cash flow statement is to record the cash inflows and outflows that take place within a certain time period and calculate the net cash flow value. The cash flow statement is often used in tandem with a balance sheet and income statement as their third important component.
Why is the cash flow important?
A cash flow statement is a very clear, concise, and to-the-point depiction of how well the company is doing in terms of its cash position. Any business needs to have sufficient cash at all times to sustain its operations and for any sort of contingency situation. As a company, you need cash to pay your salaries, pay your utilities and taxes, and make new purchases. If you don’t have a sound cash position, it’ll be difficult for the business to stay solvent and prevent bankruptcy.