Cash Flow in Business  

Cash Flow. This is the pattern of a firms receipts of income and outgoings of expenses. To survive businesses need to ensure sufficient cash flow and not just profitability. For example, if a business sells goods, but, doesn’t receive payment for a long time, it may go out of business even though on paper it has made profit.

To overcome cash flow problems a firm can borrow. However, it may require:

  • capital to act as security for the loan
  • Convincing forecasts of future cash flow.

Because of the importance of cash flow to a business, late payment can be extremely costly to a business and this is often a headache for new small firms.

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