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Why Cash Matters
Ofcourse, by now you may be saying to yourself, “So what? All this is cumbersome to figure out, and why do I care?”
For starters, let’s see what our sample company’s cash flow statement reveals. In terms of operations, it is certainly doing a good job of generating cash. Operating cash flow is considerably higher than net income. Inventory declined, so it’s reasonable to suppose that the company is tightening up its operations. All of this makes for a stronger cash position.
We can also see, however, that there is not a lot of new investment going on. Depreciation outweighed new investment, which makes us wonder if management ...
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