FT Guide to Using and Interpreting Company Accounts, 4th Edition

11

Cash management

Introduction

There’s a close relationship between cash management and solvency, as a company that manages its cash resources effectively is unlikely to have any solvency problems. Consequently, the way that a company manages its cash is crucial to its long-term survival. It has to fund the business in the most efficient way and optimise its use of cash resources. If you want to understand a company’s financial performance, its opportunities and its threats you must be able to analyse the way that it is managing cash. To do this you have to look at its:

• operating and financial reviews;
• cash flow statement;
• working capital ratios;
• loan profile.

The operating and financial reviews

These give you useful insights into ...