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Financial Management Helps Maintain The Cash Flow

Cash flow is the one of the most important elements of running a business and if it is mismanaged it can spell disaster for any business. Financial management helps maintain the cash flow of businesses giving it an opportunity to survive, expand and excel in a dynamic and competitive environment.

Creating and maintaining a positive cash flow to manage short term operations is the goal of every business, and financial management helps maintain the cash flow by applying sound financial management principles.

The movement of cash in and out of the business is called a firms cash flow. This cash flow primarily arises from collections from customers and payments made to various suppliers. Essentially cash flow arises from 3 main sources namely operating, investing and financing activities.

Financial management helps maintain the cash flow for a business because it monitors, analyzes and tweaks the business’s cash flows according to its immediate and long term needs. It monitors money coming in and money going out of the business. Financial management helps maintain the cash flow in that it makes sure that a business can meet its cash obligations to its suppliers and similar liabilities.

Financial management helps maintain the cash flow for a business because it ensures that a business never faces a cash shortage which will definitely compromise on its financial health and market reputation.

Maintaining a positive cash flow for the business is crucial to the liquidity of the business. Due to poorly managed cash flows a business may not be able to fulfill orders from clients and other customers. This means it will be late in reaching the market and therefore will lose out on its competitive advantage and market reputations. However, financial management helps maintain the cash flow due to constant monitoring and managing of the flow of funds making certain that a business always has cash on hand for its requirements.

Due to various checks and balances, monitoring tools and cash flow statements, financial management helps maintain the cash flow for businesses ensuring their survival and eventual profitability.

Financial management helps maintain the cash flow by giving emphasis on each area of investing, operating and financing activities. Weakness in one area can be rectified by applying financial management principles and techniques.

Therefore, financial management helps maintain the cash flow for businesses using its fundamental principles thereby ensuring its operational effectiveness and ultimately, business survival and growth. In this case, enjoying high profits and returns is the driving force.

 
 
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