Investing Basics For Your Future!


Investing BASICS For Your Futures!   

CASH FLOW describes how money flows into and out of a business.  But cash flow could also be applied to our personal finances as well!  The term covers a specific time period, such as a month or quarter(3 months).  But the important thing to remember is managing cash flow is crucial for long and short term success in achieving our personal goals!


Even highly profitable businesses can fail if they don’t manage cash properly.  So imagine the consequences to the average person or family!  Whenever a business goes bankrupt?  There are consequences that can ripple in many directions.  But when we go Bankrupt?  That could mean our children will not be getting the things they need.  In an uncertain future for the novice investor considering entering the market?  Knowing the basic principles and techniques for effective cash flow management can make the difference between success or failure.  

POSITIVE CASH FLOW means cash is being collected faster than it is being spent. It’s a sign of good health and means a business will likely be able to cover its bills. If the cash flow picture shows a negative figure, cash is going out faster than it is coming in.
NEGATIVE CASH FLOW may be acceptable and expected from time to time, especially if there are major unusual expenses. However, long-term negative cash flow may mean a business won’t be able to pay employees, landlords, suppliers, lenders, utilities, and others. Lack of cash can force a business to close its doors or seek bankruptcy protection. (Let’s avoid that option). 

In order to manage cash flow optimally, businesses need a

record of money that flowed into and out of the business during a set period. That record is called a cash flow statement, and it shows how much cash various activities produce. These statements, which can be calculated directly or indirectly, typically include three parts:

Operating activities ~ Tracks cash flow that’s generated

once the company delivers its services and goods and includes both expenses and revenue

Financing activities ~ Tracks cash flow from the sale or purchase of physical property, like equipment and real estate, and intangible assets, like patents, trademarks, and copyrights

Investing activities ~Tracks cash flow from debt and equity financing

One of the most important parts of a cash flow statement is WORKING CAPITAL, the amount of money needed to run the business.  Computing working capital gives you a quick analysis of the liquidity of the business over the future accounting period. If working capital looks adequate, a cash flow budget may not be needed, but if working capital looks inadequate, a budget may avoid future liquidity problems.

Skillfully managing cash flow is an essential business skill, but it is easy to make mistakes. Problems often result when clients and customers pay slowly reducing the inflow of cash. Cash can also be throttled by a revenue slump.

Businesses may create their own problems by making ill-timed investments, buying too much inventory or paying creditors too quickly. Poor record-keeping can lead to business owners being surprised by bills they weren’t prepared for.

Though the terminology used in this article mainly refers to running a business?  There is good reason to look at your own cash flow in the same manner!   When investing how much and what type of risk you may want to take should ALWAYS be your first consideration!  This is why understanding and allocating the proper amount of money for investment is the 1st step in building a successful portfolio!  


Watch the attached video.

Orlando Walters. 20 Year Financial Services Pro.  Member of NAIFA(National Association of Insurance and Financial Advisors and  MDRT(Million Dollar Round Table) and Friend of Mamasposts!

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