Question

Small Business Management- Can you please assist me with answering this question. Please be sure to include an example and explanation in discussion is thorough. Kindly include citation in the discussion where necessary. Also please provide reference. Thank you so much. I will really appreciate this. Again thank you.

1. Cash flow is more important than profit for a small business. Discuss this statement and
include examples in your response. Value 10 points

Answer 1

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There is no doubt about the fact that cash flow is the king of every business. Profit is calculated on accrual basis and remains in books but the strength of a business is determined after going through its cash flow. Profit is unrealized value which may or may not realize. Cash flow is the realised cash which can be used for further business or expansion or for general business expenses. It is well known that Cash flow is more important than profit for a small business to carry on its function. Small business have small capital base which they cannot block otherwise business will stop.

Example: Bankers give loan by checking the eligibility of firm to pay back the same. Creditors supply goods based on soundness of its cash flow and payment system. To pay salaries on time to employees and other day to day expenses. Purchases done is cash is entitled for extra discounts as the same fund can be used by seller for further rolling.

Reference: To give a clear understanding of concept a reference of real example is taken here that to run a small scale business cash flow is the life and blood. Proper Cash flow management is the base of business to meet all the expenses and establish credit worthiness. During corona pandemic small scale business survival become very difficult as there was no cash flow and this causes shut down of small sscale business and GDP of every nation is hitting its down. https://www.channelfutures.com/from-the-industry/cash-is-king-especially-in-todays-challenging-business-environment