Investing cash flow11/25/2023 However, having a positive cash flow merely does not secure a company’s future growth. On the other hand, a negative cash flow indicates a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves. ![]() If a company is experiencing a positive cash flow, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, shell out for expenses, reinvest in the business, endure downturns and finally return wealth to shareholders. While in any business cash moves in and out, it is net cash flow that explains how much money a company is actually generating. To figure out this efficiency, one needs to consider a company’s net cash flow. This holds more relevance in today’s world amid uncertainties in the global economy, market disruptions and dislocations, as well as liquidity concerns. In fact, cash indicates a company’s true financial health. Therefore, to invest in the right stocks, one must go beyond profit numbers and look at a company’s efficiency in generating cash flows because cash not only guards it from market mayhem but also suggests that profits are being channeled in the right direction. However, even a profit-making company can have a dearth of cash flow and face bankruptcy while meeting its obligations. Often, investors flock to companies with solid top-line growth and increasing profit numbers. ![]() MHO, Modine Manufacturing Company MOD, The Andersons, Inc. In this regard, stocks like M/I Homes, Inc. ![]() Cash offers the company flexibility to make decisions, the means to make investments, the fuel to run its growth engine, and can, indeed, be called the lifeblood of any business. If achieving profit is a company’s goal, then having a healthy cash flow is essential for its existence, development and success.
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