Cash Flow and Capital Budgeting

Success of any business can be determined through its capacity to generate positive cash flows. Therefore, Cash inflow and outflow is considered as one of the most significant indicator of the continued existence of a business in future. Therefore, the stake-holders focus on two things while investing in business:

First, how does business generate funds and

Second, where does business invest those funds for generating more cash flows.

The statement of cash flows shows increase and decrease in cash and cash equivalents rather than working capital.

Objectives of a cash flow statement:

The main objective of a cash flow statement is to assist financial statement users:

  • · in assessing the business’s ability to generate positive cash flows.
  • . in assessing business’s ability to bridge the gap between out flows and inflows of funds.
  • · in assessing its ability to meet its short and long term obligations.
  • · in assessing the rationale of differences between reported and related cash flows.
  • · in assessing the effect on finances of major projects during the year.

 

Cash Flow analysisAdminCapital Budgeting TechniquesCash FlowsCash FlowsCash Flow and Capital Budgeting Success of any business can be determined through its capacity to generate positive cash flows. Therefore, Cash inflow and outflow is considered as one of the most significant indicator of the continued existence of a business in future. Therefore, the stake-holders focus on two things while investing in...Investment analysis basics