strategy and business

If Cash Is King, Why Doesn’t It Rule?

It is a truth universally acknowledged by business executives, Wall Street analysts, and investors the world over that cash is the lifeblood of an enterprise.

Free cash flow is a critical business performance metric. It’s how we measure successful investment and execution, how profit is distributed to shareholders, and how employees get paid. Without cash, a company folds. Irrespective of their size, shape, or footprint, businesses are on a continuous hunt for cash. At the same time, as the broader corporate goals are broken down into separate key performance indicators (KPIs), the primacy of optimizing organizational cash can get lost. In other words, the metrics provide no insight into how actions taken in one part of the business affect cash generated or held elsewhere. It prompts the question: If cash is king, why is it treated as a by-product rather than a focus?

The most important thing to look at in evaluating business performance is cash accessibility, or the ability of a company to use its free cash when and where it needs it. Businesses may have cash tied up in different places for a variety of reasons — often having to do with currency restrictions, banking regulations, and taxes — which can compromise cash accessibility. When money was cheap, there was usually a quick fix for this problem: Take on debt. But two things have changed. Interest rates are starting to rise globally, and tax regulations are shifting worldwide toward dramatically restricting the deductibility of interest expense.

Most companies do not have a handle on how accessible their cash is because their data collection and their reporting functions

Anda sedang membaca pratinjau, daftarlah untuk membaca selengkapnya.

Lainnya dari strategy and business

strategy and business18 mnt membacaPsychology
10 Principles For Leadership Presence
THINK BACK to the last conference you attended. How many presentations do you remember? Probably not too many. As a leader or aspiring leader at any level, one of the biggest challenges you face is to inspire and motivate other people so that they ca
strategy and business5 mnt membacaSmall Business & Entrepreneurs
Can You Be A Shaper Of Great Institutions?
As a business strategist and writer, R. Gopalakrishnan has devoted his work to studying ethics, leadership, and human capital. He began his 31-year-long career at Unilever’s massive, idealistic India business, and then became a board director at the
strategy and business7 mnt membaca
Niche Work If You Can Get It
Whatever you’re going to do, do it well. Sounds obvious. But deciding precisely what to do — or whether to keep doing it — is often hard for leaders as they look to distinguish their companies, stay competitive, and adapt to changing market forces. N