About effective cash flow management of the company
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Date
2021
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
Managing company’s cash flow is part of the financial activities that are
important to the overall stability of the business. Competition between companies
makes it difficult to increase profit as well as maintain positive cash flows. While
the main goal of companies is to increase profit and market share, less attention
is paid to forecasting and managing cash flows. Cash flow is a driving force for
any company and developing the right management strategy is vital to any sector
of the economy.
The aim of the research is to discuss the theoretical-methodological aspects
related to cash flow management and to evaluate the factors affecting cash flow
in order to improve the company’s cash flow management.
Based on the consideration of cash flow measurement and reporting
methods, we can say that these methods differ from each other only by the
specifics of calculating cash flows obtained from operating activities. If the
direct method of incoming and outgoing cash flows occurs directly, in the indirect
method, the financial result of the company, profit, is adjusted for non-cash items
and we receive the net cash flow. This method is much more informative for the
company’s management as it shows the relationship between the profit earned
and the cash flow.
A review of money management models allows us to say that the advantages
of the Miller-Orr model over the Baumol model lie in the realistic assumptions,
namely that the Miller-Orr model does not allow an equal amount of cash flow
to be found in the Baumol model. Conversely, the Miller-Orr model assumes that
cash flows fluctuate over time, which is, of course, much more realistic. Therefore,
this model is more usable than the Baumol model.
Description
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Keywords
Cash flow, cash flow management, cash flow management methods, cash flow management models
Citation
Economics and Business, №4, 2021, pp. 141-151