Why price-cash Flow is important

[Oluwasegun purpose]

When you study your financial indicators of a company you should not Miss the examination of it's cash/price flow.. it represents another measurement of the company's earning power, or how much it can generate for it's shareholders.. However, price/ cash flow has its advantages..one of them is that it is not easy to calculate it and it is also difficult to define what a cash flow is

the thorough understanding of this ratio requires the knowledge of earnings and expenses recording..

the income statement is the financial document which includes information on the profits or losses of a company..Every company is required to keep such a statement..At the top you can find information on the revenues of the company, whereas are found farther down...they are subtracted from revenues in order to get whether the company has made a profit or a loss....

Expenses can be of several types.. one of them is the expense incurred around the production of the company's goods and services.. other expenses don't involve the direct spending of money. An example of such an expenses is accumulated depreciation on equipment or buildings.. Aside from the operating expenses,, there are administrative expenses,such as taxes and other financial costs

company's accountants May greatly influence the numbers that appear the father you go down the income statement.. this is often done in order to distort

 

[Holicent]

Imagine you're running a business. You want to buy something, some new equipment, maybe, or some new inventory. How do you decide how much to pay? Well, one way is to just look at the sticker price and try to get a good deal. But that's not always the best way. The best way to decide how much to pay for something is to look at its cash flow. The thing about most businesses is that they don't make money right away.

A company may have an idea for something new, but it costs a lot of money to turn that idea into reality. It may take years for the company to start turning a profit on its investment (maybe even a decade). So what if you bought that business? Would you be able to make enough money from it in the future? Or would you lose? If you want to know whether or not your business can make money in the future, then you need to know how much cash it's going to bring in over time. That's called "cash flow"—the amount of money the business will generate over time based on its assets and liabilities. By looking at how much cash flow a company has, investors can see whether the company can be productive or not.