Chapter 6

Exploring Your Business’s Nerve Center: Cash Flow*,1


Cash flow is your firm’s lifeblood. It means, literally, cash flowing through a business during the course of a fiscal year. Lenders say that cash flow analysis may be the most important tool in their repertoire, the tool by which commercial and investment bankers evaluate loans and value companies. A cash flow statement will highlight your firm’s activities in a way that an income statement will not. Through cash flow statements, experienced lenders figure out, before they approve an extension or a new facility, how efficiently and profitably customers used prior loans. Without cash flow statements, lenders have an incomplete picture of the business simply because ...

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