Good Things to Know About Your Company’s Cash Flow 

Cash flow is one of the most direct indicators of any company’s financial health. Since cash flow consists of all revenues coming in from customer payments and all expenses being paid out to suppliers and other creditors, it can say much about the status of a business. Consistently positive cash flow probably means the company is in good financial shape, whereas consistently negative cash flow is an indicator of financial problems. Here are some important things to know about cash flow.

Cash flow analysis

When cash flow is strongly positive for a long period of time, close analysis may not be as necessary to perform, but when things go negative, it’s time to take a close look at what’s actually happening in the business. A cash flow statement is often used for this purpose, and it has three chief categories of information, the first of which is known as operating cash, and includes day-to-day transactions. Investing cash flow consists of those transactions which pertain to expansion of the business, and financing cash flow is comprised of all those transactions related to dividends paid to stockholders.

What cash flow categories mean

Operating cash flow provides a good look at the actual conduct of business, i.e. all those transactions which relate to incoming payments and outgoing payments. An analysis of these transactions will help to show the relationship between the two, and how to go about creating a positive situation. When examining investing cash flow, an undesirable indication would be that there is little to no activity in this area, because that means no money is being reinvested in the business. Analyzing financing cash flow is another indicator of the company’s financial health, because it could either show healthy dividends being paid to stockholders, or very little, because the business is not as profitable as it could be.

Improve your cash flow with Revap Capital Group 

Most companies have cash flow issues at one time or another, and sometimes they simply don’t have recourse to funding that would relieve the issue. Contact us at Revap Capital Group if your company experiences this kind of scenario, because we may be able to recommend some potential solutions for your cash flow shortage.

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