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From the Statement of Cash Flows, suggest some ways a company can improve their cash flow.

Question:

From the Statement of Cash Flows, suggest some ways a company can improve their cash flow.

Answer and Explanation:

The liquid assets of a company tend to increase if positive cash flow is indicated. To increase the cash flow, a company should:

  • Offer discounts on loans. Businesses and companies some time offer products and services on debt to consumers or even offer loans to other businesses. These practices reduce the cash flow within a company. Offering discounts on loans if they are paid prior to their maturity date will lure debtors to pay off their debts ahead of time as everyone loves an incentive. As a result, the cash flow of a company will considerably improve.
  • Conduct a credit check. Most customers are poor at paying back their debts. Such customers expose businesses to cash flow shortages. To avoid granting loans to customers who are poor at paying them off, managers should conduct a customer credit check to determine their status. This will improve the cash flow of a company as grants won't be awarded to customers with a bad reputation.

Learn more about this topic:

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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
10K

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