Chapter three discusses cash flow as part of a \"survival measurement\". Cash fl
ID: 466772 • Letter: C
Question
Chapter three discusses cash flow as part of a "survival measurement". Cash flow is extremely important! A company can have sales like crazy. However, if they are not collecting on accounts payable, there is no cash coming in to pay bills and wages. That is one reason why accounting is so important. The company has to constantly balance cash. Most larger companies actually take a portion of their cash and invest it in bonds, stocks, and other financial instruments. They make money on their money. What are some other risks if cash flow runs low?
Explanation / Answer
when collections are stopped and only outflows are increasing then the cash flows comes down, and if the credit period has given more more, the collections will come down in present time.