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Essay / Research Paper Abstract
This 3 page paper looks at the role of cash flow in businesses. How businesses can track and increase cash flow are some of the things discussed. Bibliography lists 4 sources.
Page Count:
3 pages (~225 words per page)
File: RT13_SA343csh.rtf
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of net cash generated by a business during a set period of time (Scott, 1988). Although many people wonder why cash flow is so important, when businessmen refer to the
"bottom line" or profit as all that counts, poor cash flow can kill a new business faster than anything else. When starting a new business for example, a business plan
will logically include cash flow projections. This is nothing more than figuring out how much money will be coming into the business and how much needs to go out. The
expenses are a bit easier to project as they include rents and operating expenses which generally do fall into a range or are in fact a specific amount. Net income
is a bit more difficult to predict. If a business depends on monthly transactions, one will not be able to adequately project cash flow at the very beginning of an
endeavor because many unknown factors must be included in the equation. For example, suppose one opens a pizzeria in a busy neighborhood. While one might project how much pizza they
will likely sell based on research, the actual income will depend on a number of factors including pricing, location, marketing, advertising and the like. Some of it in fact is
luck. Thus, it is prudent to have enough cash to pay overhead for a number of months before counting on income to cover expenses. Eric Tyson warns: "An idea can
soon turn into a failed business if you neglect to look at or be realistic about the financial side of the business. Do enough research so you can come up
with good estimates of the amount of cash you will need" ("Industry," 1998). Because a business will not be able to say afloat without proper cash flow to buy necessary
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