Have profit, but don't be without cash!

It shows how much cash is generated and used during a given time period.

How can this be useful?

Imagine that your Profit and Loss Statement at the end of the year shows profit of $100.000. The shareholders are happy they could receive dividend. Employees are happy they can have higher wages next year. But is this the reality? Is this really possible?

This is where the cash flow statement can help. It shows whether there is really enough cash in the company for maintaining the business and at the same time paying dividends and /or increasing costs and investments.

Historical cash flow indicator

Cash flow information of a historical nature can be used as an indicator of the amount, timing and certainty of future cash flows. The relationship between profit and cash flows can be analyzed as can changes in prices over time. All this information helps management to control costs by controlling cash flow.

Check our services menu and see if we can help you build your wealth by controlling your company’s cash flows.

Ability to pay its debts

Survival of a business entity depends not so much on profits as on its ability to pay its debts when they fall due. Such payments might include material purchases, wages, interest and taxation etc., but also capital payments for new non-current assets and the repayment of loan capital when this falls due.

Does your business have enough cash to cover all necessary cash outflows? Plan your future and don’t let your self to be put in a situation when you have profit but no cash. The cash flow statement will help you to analyze the relation between profit and cash.

Company’s performance and prospects depend not so much on the ‘profits’ earned in a period, but more realistically on liquidity or cash flow.