What conclusions concerning the management of cash can be drawn from the free cash flow data?

Expert Solution

Free cash flow data of a company presents the flow of cash with the organisation. It takes into consideration the inflow and outflow of cash in the business during a certain time period.

Management can draw following two conclusions from the cash flow data:

1. If inflow of cash is more than the outflow : it is a positive position for the business as it indicates that company is having good liquidity in the form of cash. Management needs to consider the efficient use of this inflow. It should employ the cash resources in a manner to earn more benefits from it.

2. If outflow of cash is more than the inflow : it is a negative position for the business as it indicates that company is short of cash and might have spend cash from its own pockets or by taking loans. Such is position is alarming to the management as it should see to the proper management of the cash resources. This position also renders the business unattractive to the investors.

ekkarill92 answered 2 years ago

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