6
Explain how managers and business owners
manage cash flow and control costs and use
nontraditional measures of financial
performance.
Closely tied in with the cash budget is the special
attention managers pay to cash flow. Cash flow
measures how much actual cash is available for conducting business. The three sections of a cash-flow
statement are cash provided by (or used in) operating activities, financing activities, and investing
activities. A firm that writes off many income deductions will have a bigger cash flow. Many companies
trim costs to improve cash flow. Too much cost cutting can lead to low morale, low quality, and a company image of cheapness.
Many researchers and managers no longer rely
exclusively on financial ratios and related indices to
measure the health of a firm. Instead, they use a
balanced scorecard that measures the various
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