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Summary
Programme Objectives
Often, what the Owners of Companies / Borrower Customers / Lenders overlook to observe is the amount of Cash from Operations that their companies have generated in a particular year. This is one of the key performance indicators/ parameters to confirm whether the units are actually doing well in the market place and continue to remain healthy. Following the US Sub Prime crisis in 2008, there is a widespread realisation among the Lender and Investor community that merely focusing on top line and bottom line numbers and growth over a period is not adequate to satisfy oneself as to the viability and sustainability of operations of the companies concerned, and in addition, one should also monitor the cash generating capacity of their respective units over a period.
In this context, a Statement of Cash Flows serves as a map that depicts where the cash came from and where it went, (giving you an opportunity to probe) and it is a crucial planning tool for any business’s long term success. In addition to reporting cash flow from operations, the cash flow statement can highlight other key factors like, whether the company is fast running out of cash while growing fast or are the promoters withdrawing money from business, or whether they are refinancing their loans by taking loans afresh etc. If cash flow is stagnant, declining, too small, or even negative, it is important to evaluate the same to convince yourself as to the sustainability of operations of the companies in the long run.
