Answer to Question #78440 in Financial Math for alissa

Question

Why is looking at cash flow an important step in a good financial plan?

Answer 1

Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow.
Assessing the amounts, timing and uncertainty of cash flows is one of the most basic objectives of financial reporting. Understanding the cash flow statement – which reports operating cash flow, investing cash flow and financing cash flow — is essential for assessing a company’s liquidity, flexibility and overall financial performance.
Source: https://www.investopedia.com/terms/c/cashflow.asp#ixzz5J2NEcRzW