Cash flow can be broken down into three sections:

Operating cash flow: often referred to as working capital, is cash flow generated from internal operations. It comes from sales of product or service of your business, and because it is generated internally, it is under your control.

Investing cash flow: is generated internally from non-operating activities. This includes investments in plant and equipment or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash outside of normal operations.

Financing cash flow: is cash to and from external sources, such as lenders, investors and shareholders. A new loan, repayment of a loan, issuance of stock, and payment of dividend are some of activities that would be included in this section of cash flow statement.

Good cash management is simple. It involves:

Knowing when, where, and how your cash needs will occur

Knowing best sources for meeting additional cash needs

Being prepared to meet these needs when they occur, by keeping good relationships with bankers and other creditors

The starting point for good cash flow management is developing a cash flow projection to help them develop necessary capital strategy to meet their business needs.

You may freely reprint this article provided author's biography remains intact:

How strong is your management team?

How does your need for financing fit in with your business plan?

If you don't have a business plan, make writing one your first priority. All capital sources will want to see your business plan for start-up and growth of your business.

There are two types of financing: equity and debt financing. When looking for money, you must consider your company's debt-to-equity ratio - relation between pounds you've borrowed and pounds you've invested in your business. The more money owners have invested in their business, easier it is to attract financing.

If your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won't be over-leveraged to point of jeopardizing your company's survival.

You may freely reprint this article provided author's biography remains intact: