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Importance of cash flow

Cash Flow is the money that’s flowing in and out. Having a positive cash flow means that more

money is coming into the business than going out. It’s just as important as profit when it comes

to determining your business’ performance. Following points are the importance of cash flow:

 Make Better Plans and Decisions

 Understand Where You’re Spending Money

 Expand at the Right Time (h68)

Financial ratios - definition, categories, analysis and interpretation, application and limitations

Financial ratios - are created with the use of numerical values taken from financial statements

to gain meaningful information about a company. The numbers found on a company’s financial

statements – balance sheet, income statement, and cash flow statement – are used to perform

quantitative analysis and assess a company’s liquidity, leverage, growth, margins, profitability,

rates of return, valuation, and more.

Categories - Financial ratios are grouped into the following categories:

 Liquidity ratios

 Leverage ratios

 Efficiency ratios

 Profitability ratios

 Market value ratios

Liquidity Ratios

Liquidity ratios are financial ratios that measure a company’s ability to repay both short- and

long-term obligations. Common liquidity ratios include the following:

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