Cash flow is an important financial statement representing the actual accounting income and flow of cash. Companies depend on cash flow statements to make important decisions such as capital budgeting and risk analysis. Chapter 10 and 11 of the ACP Financial Theory and Practice gives insight into the importance of cash flow to organizations such as assessing the risk of businesses ( Brigham et al., 2016) . One major issue learned from the chapters is the importance of cash flow to businesses. Businesses use cash flow to make several decisions such as risk analysis and capital budgeting as well as to determine the net worth of the business.
As indicated in the chapters, cash flow is an essential financial statement that indicates the cash generated and spent by a company during a given period. It is the best measure of the financial performance of a company since it shows the real net worth of the business. As opposed to other financial statements, cash flow indicates the real financial performance of companies since it exclude debts and other liabilities. Other financial statements such as income statement can provide information regarding the interest paid to service a loan and balance sheet indicates the loan owned to an individual but only cash flow can inform managers the cash used to service the loan. The chapters provide insightful information regarding the use of cash flow to assess the risk of businesses. Chapter 10 and 11 of the book indicates that cash flow statement gives information on how a company spends money on various activities as well as provides information regarding the money generated from the investment of the company ( Brigham et al., 2016) . This indicates that managers should use cash flow to analyze the business risks since it provides the real cash that organizations spend and use. In essence, it is used to calculate several financial ratios that can be used in by investors to determine the net worth of a business.
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References
Brigham, E. F., Ehrhardt, M. C., Nason, R. R., & Gessaroli, J. (2016). Financial Management: Theory And Practice, Canadian Edition . Nelson Education.
