Explain how cash balance and net income can diverge so significantly.

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Finance

Explain how cash balance and net income can diverge sosignificantly.

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What is Cash Flow Cash flow is the blood of a business It is the measure of what cash is coming in and what is leaving Cash flow is a more accurate measure of whether a company has enough capital to sustain itself For example a company can be extremely profitable and still go out of business due to poor cash flow In planning a new business cash flow is still a very important concept to focus on Different services and habits affect cash flow For example a companys payment terms greatly affect the amount of cash flowing in and out of a business If it gives terms that are long the business could have trouble meeting its other financial obligations If the terms are short it can give the business terrific cash flow The difference in length of terms comes down to the sizes of accounts receivable and inventory If a See Answer

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