Question

Explain why "cash flows to sale" and "cash flows to assets" are important in their on way? in your own words please.

Answer 1

Cash flow of sale is important because of the following reasons:

Cash is very important for all companies. Cash is needed for payments to suppliers, employees, shareholders, and for operating expenses and investment in capital assets.

Having cash is a key requirement for a business to stay solvent Whe a business has no longer enough cash to pay its dues, it is often declared b​​​ankrupt.

Cash flow from assets is the aggregate total of all cash flows related to the assets of a business.

Management can generate positive cash flow from assets by using techniques such as raise prices, redesign products,cut overhead costs.