Monitoring cash flow is important because it measures a company's ________.
A) short-term financial health and financial efficiency
B) future needs for equipment
C) long-term financial health and financial efficiency
D) total assets
E) equity

Question

Quizplus · Accepted Answer

Cash flow measures the actual inflow and outflow of cash in a business over a defined period of time. Monitoring cash flow allows a company to understand its short-term financial health and financial efficiency. This includes having enough cash to cover expenses and pay debts when they are due. It is an important financial metric for determining a company's ability to meet its financial obligations in the short term. Options B, C, D, and E are not entirely accurate in the context of monitoring cash flow.

Monitoring Cash Flow Is Important Because It Measures a Company's