FINC440 cash flow and liquidity of assets are important factors to consider in a business. Cash flow refers to the increase or decrease in the amount of money that a business, individual, or institution has. Additionally, it describes the amount of cash that a business consumes or generates in a certain period. It is the movement of money in and out of a company. There are several types of cash flow with various important uses for performing financial analysis and running a business. Furthermore, the ability of a company to generate positive cash flow determines its ability to create value for shareholders.
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THE TYPES OF FINC440 CASH FLOW
Primarily, there are four types of FINC440 cash flow. They include operating cash flow, investing cash flow, financing cash flow, and free cash flow. Free cash flow is the excess of operating cash flow over capital expenditure. Additionally, it is an important tool for investors as it measures the liquidity of assets that is available to investors. Financial cash flow comes from conducting financial activities while running a business. It involves obtaining and repaying capital. A company generates investing cash flow from investing activities such as the purchase and sale of long-term assets.
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THE IMPORTANCE OF LIQUIDITY OF ASSETS
When running a business, it is important to keep a certain amount of liquid assets in place. The liquidity of assets helps the business to meet its short-term obligations. These are the current liabilities that are due within a year and require immediate convertibility to cash. The liquidity of assets is an important factor that investors consider when making financial decisions and determining free FINC440 cash flow. Moreover, a company often measures its liquidity using the quick ratio which compares the number of liquid assets with the number of current liabilities.
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