Cash Flow

Cash Flow

Cash Flow is considered as the ‘life blood’ and ‘king’ of the business organizations, researchers argue that business entities with poor cash flows are deemed to fail. Businesses in the course of operations take risks that could jeopardize the cash flow, although the high the risks, the higher the returns if the business succeeds in overcoming the challenges (Jury, 2012). Such risks could identify with growth, new projects and capital budgeting among others. As the Chief Financial Officer (CFO) of an organization struggling with financial resources, with minimal positive cash flow, there are chances that the organization will fail.

Project development team has developed a new product that will be ready in two years, with the expectation that the new product will meet the needs and wants of the target market, hence saving the company from failing. The challenge is running out of cash within the next six months; as the CFO, there are different ways of obtaining funds to keep the organization thriving and alive and at the same time keeping the stakeholders happy.

Financing business entities is a complex process and challenging at the same time. There are different techniques that can be used in funding the project; the organization can take a bank loan, take loans against accounts receivable factoring, use assets in securing credit and issuing equity (Schaeffer, 2013). The best is to involve the shareholders of the organization in funding the firm; equity has low interest as compared to the bank loans, hence easy to manage. As the CFO, I would prefer financing via equity rather than financing through debt. Financing through debt increases the risk of defaulting while financing through equity will involve the stakeholders, where the company will issue convertible debts and shares (Schaeffer, 2013).

References

Jury, T. (2012). Cash Flow Analysis and Forecasting: The Definitive Guide to Understanding and Using Published Cash Flow Data. Hoboken, New Jersey: Wiley.

Schaeffer, H. A. (2013). Essentials of Cash Flow . Hoboken, New Jersey: Wiley.