Financial management is one of the most important responsibilities of owners and business managers. They must consider the potential consequences of their management decisions on profits, cash flow and on the financial condition of the company. The activities of every aspect of a business have an impact on the company’s financial performance and must be evaluated and controlled by the business owner.
Life Cycles of a Business
Most companies experience losses and negative cash flows during their startup period. Financial management is extremely important during this time. Managers must make sure that they have enough cash on hand to pay employees and suppliers even though they have more money going out than coming in during the early months of the business. This means the owner must make financial projections of these negative cash flows so he has some idea how much capital will be needed to fund the business until it becomes profitable. more