Why is the actual timing of cash inflows and outflows is ignored?
Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.
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Step 1
Cash inflows and cash outflows is the main integral part of the business. Without investment one can’t earn profit and without money one can’t take the chance of investing money again. This is an operational cycle which is ongoing, Cash outflow is must if the resources to run a business are maintained. The cash inflow is must to meet up the entrepreneurs’ personal needs and business needs.
Step 2
Small businesses face money problems basically because of the difficulty they face in collecting their own money which is due with customers. The credit selling is a part of small businesses. They keep the option of credit selling to attract more customers and to form a loyal customer base. Many customers take undue advantage and don't pay the money back on time. It also happens that some customers don't even bother to pay the money afterwards. The seasonal variation in sales is yet another reason which troubles the entrepreneurs. Sometimes due to unavoidable reasons unexpected decrease in sales is also observed. Due to all these reasons it is very important to plan for the amounts and timing of cash inflows and cash outflows.
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Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
