Cash Is the Life-Blood of any Business and without It Survival Is Very Unlikely - Essay Example

"Cash is the life-blood of any business and without it survival is very unlikely." Essay Jerome This essay illustrates the importance of cash and cash flow management in the survival and success of a business in very simple terms. The essay beautifully starts off with a comparison of cash in a business to blood in a human body in order to clarify how cash is the life blood of any business but this comparison is only evident in the start and end of the essay and then throughout, there is no mention of cash being an equivalent to blood. Considering this is such a short essay, I also feel that the work of Busch that has been cited is way too long; this quoted part comprises almost one fifth of the essay! Perhaps quoting only a part of it or incorporating only the main points into the essay would have been more appropriate. The section "benefits of knowing your cash position" does not clearly highlight the benefits. It only gives the three main areas of a cash flow statement. Although these areas do indirectly highlight the benefits of knowing your cash position, perhaps mentioning a few other benefits would have added further clarity. The following benefit, for instance, could have been added: Companies that know their cash position well are in a much better situation to provide their stakeholders with better information that they need to assess the financial well being of the company. This in turn maybe important when a company is trying to obtain a loan and needs to provide its cash position to the lender. Similarly, other stakeholders such as investors, stockholders, customers, etc. may also require this information. No example is mentioned when explaining the third area of the cash flow statement: Cash from financing activities. The Microsoft example should be extended to clarify this section of the cash flow statement as well. Essay 2 (Sabrina): This essay does not completely explain how cash is the life blood of any business. The importance of cash and preparing cash flow statements has only been inadequately explained in the beginning. The word "life-blood" has not been emphasized. In other words, the writer has only explained how cash can aid businesses and help different forms of business better predict their cash needs and perform their tasks well. However, the writer has failed to illustrate that before helping businesses, more important is the fact that cash is a necessity- a source of survival for businesses and they not only need cash to help them do their tasks better but they need cash to survive-it's a "have cash or die" situation. I believe highlighting this point is essential considering the topic of this essay requires an explanation of how cash is the life blood of any business. The conclusion only mentions the importance of cash flow statements and not cash in general even though the tag line of the topic only mentions cash. There is no mention of cash flow statement in the tag line. Although cash flow statements ultimately boil down to the importance of cash, mentioning the importance of cash in general and not specifically cash flow statements would have been more appropriate. Essay 3 (Nadrah): Although the essay starts with a quotation, the writer directly jumps off to explaining cash flow statements. Perhaps explaining one or two lines about the importance of cash in general and cash being the life blood of any business would have been more appropriate. The essay mentions a very strong point: " all the three statements above, when integrated, are required to make and support interrelated financial decisions." This point has been explained and elaborated extremely well and could not have been done with any more perfection. There are some concepts that have not been explained too well. Consider, for instance, the concept of free cash flow hypothesis. The writer only states that "According to the free cash flow hypothesis, managers may choose to expand operations because their incentives are not aligned with firm value maximization." This explanation is not by itself adequate and requires further clarification. Considering this is a short essay, the writer could only have added that this concept implies that firms with large cash flows will end up wasting them when they invest them in projects with negative cash flows in bad years or years of poor investment opportunities. Doing so could have provided the clarity needed. Essay 4 (Paul): The lines "Despite the advantages of cash flow statement there still exists controversies in respect of published cash flow is the problem of proper matching of related items when preparing historical cash flow" does not grammatically make sense and therefore, requires modification. The essay explains the importance of cash and cash flow statements throughout. Therefore, there is no need to mention the section named importance separately. The conclusion of this essay is not satisfactory. The essay should close with a concluding remark or one statement that sums up the entire essay, in this case, highlights the importance of cash or summarizes how cash is actually the life blood to any business. The writer does not do any such thing. In fact, he is talking about income statement and balance sheet in the conclusion while the focus of the essay should be "cash/cash flow statement"! Essay 5 (Colin): The statement "The differences between profitability and liquidity (cash) emerges wherein it is possible for a company to appear profitable only to be go into bankruptcy" does not appear to be grammatically correct. Writing sentences that are grammatically correct is extremely important for a writer to maintain readability. The writer explains the relationship between the three statements: Income Statement, Balance Sheet and Cash Flow Statement very well through the use of arrows. However, sufficient information is not provided to explain the logic behind those arrows. The writer, for instance, does not fully explain how P&L provides a one way feed into Cash Flow or why cash flow does not feed back into P&L. Adding this could provide further clarity to the topic. The writer does not come back to the gist of the topic in the conclusion which is cash being or being not the life blood of any business. In fact, the writer does not end on any concluding remark that sums up the entire essay. The writer is making a new point in the final line of the essay. I believe the last few lines of an essay should always sum up the entire essay and revisit the gist of the essay in a short sentence rather than introducing a new concept altogether. Read More