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The Role of Cash in a Business
Crucial Lesson Taught to People in Taking First Aid
Always check first if a victim is breathing, and if not, deal with that first.

Statement of Cash Flow

There have been instances where people have tended to bleeding wounds, only to find that the victim died from, say, a blocked air passage.
Many things are essential to life, but in the short term, nothing is more important than breathing, in that an absence creates the most immediate life threatening "crisis".
Cash as Breath of a Business
Anyone running a business should think of cash as breath.
Cash, in a broad sense, means a positive bank account or the access to a credit line.
Another way of thinking: "If I write a check, will the bank cash it"?

The Role of Cash in a Business

The Role of Cash in a Business

Cash as Breath of a Business (Cont’d)
Cash as Breath of a Business (Cont’d)
When a business loses access to funds, suppliers stop shipping and workers stop showing up at work.
Inevitably a creditor will take steps to put the firm in receivership, at which point the owners have legally lost the ability to operate the business.
A company going into receivership is normally broken up: assets are sold, often at a steep discount, to recover funds to payoff creditors.
The management of a business sometimes may be so focused on longerterm issues:
(1) bringing a new product to market
(2) working with an existing customer
(3) attracting new investors

They might lose sight of the short-term cash position of the company, and the company went into bankruptcy.
One key purpose of cash flow analysis is to predict the cash position of a company into the future.
A good management team should always have a sense of their current and future cash positions, to ensure that a short term need for cash does not ruin a business that would otherwise be healthy

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