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Why Cash Flow Is Important for Investors

Why Investors Look at Robust Busines Finances to Make Investing Decisions 

What’s cash flow? It is the amount of cash or its equivalent moving in and out of your business. Accountants call money moving into the business as income and the money going out as expenses. To attract investors, your business must have a positive and robust cash flow. 

Investors are looking for returns on their money. When they invest in your business, they expect to get good returns on time. So, they want to make sure your business is healthy financially. Businesses that generate tons of cash flow, save and invest to expand and have an excellent public reputation attracts more investors than those that don’t.

 Lenders, banks, investors, and credit providers look at your cash flow statement to analyze the financial condition of your business. This is what they see when they look at your cash flow statement.

1. Operating Cash Flow

Operating cash flow helps investors/lenders to know how much money is coming and going. It helps them to know exactly the earning ability of the business and how well the finance team is managing expenses. Investors want to see a positive or high net operating cash flow.

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2. Investing Cash Flow

How much cash is your business able to generate for investors? When investors look at your net investing cash flow, it helps them to know cash flow from investments such as stocks, bonds, securities, businesses, and other non-current assets. Investors want to know cash is not sitting idle but working.

3. Financing Cash Flow

Investors want to know how cash is flowing between creditors, owners, and the business itself. The financing cash flow helps them to know how much debt your business is carrying, how well those debts are being paid, and dividend payment to owners. They also want to know the net capital invested in your business.

4. Net Cash Flow

The most common word in business is the “bottom-line!” This is important because it helps to know whether a business is experiencing a negative cash flow (loss) or positive cash flow (profit). The total of cash inflow and outflow in the business produces the net cash flow, which helps investors to know the most current financial condition of the business.

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The cash flow statement helps investors to avoid investing in a sinking business. It helps to avoid making dangerous investment decisions. Good financial health is also a reflection of good corporate governance, good leadership, excellent teamwork, and proper financial management.

Struggling with cash flow problems in your business, which are driving investors away? Let’s help improve your business cash flow? Request for FREE Consultation. Contact Us Today! Let’s help your business grow stronger!

 

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