Financials

Cash is the lifeblood of a business. A business owner gets cash from every day activities (operations), financing or investing. Cash flow from operations should be the most significant source of cash in a business. However, a business striving for growth would often get financing to fund this growth. Let us take a look at the three main sources of cash below: Cash flow from operations Cash flow from operations

The word wealth is often confused with income. Wealth could be of various forms, there is spiritual wealth, material wealth, time wealth, etc. Wealth simply means an abundance of something you find valuable. Some people would rather have more time to pursue personal interest, others like material wealth, while others do not place a lot of value on material things but rather value spirituality. All of these values are not

Financial leverage is using borrowed funds to increase revenue producing assets. This is done with the hopes that the increased income will be more than the cost of borrowing. Using debt financing allows a business owner to benefit from financial leverage. If a business borrows money at 4% and reinvests it with a return of 10%, revenue benefit from the 6% spread. Moreover, interest expense is tax deductible further reducing the cost of

Sustainable income can be defined as the level of income that is most likely achievable by the business not just today but also future years. It excludes all temporary hikes in income due to non-repeatable events. A better way to evaluate your business is how much of your income is sustainable. Sustainable income is different from the actual income on the profit and loss statement. It is the income minus

 Cash payback period The cash payback period is the time period it takes to recover the cost of the capital investment from the cash flow generated by the investment. The cash payback is the cost of the investment divided by the net annual cash flow. Net present value The net present value discounts net cash flow to its present value. This method compares the present value of the cash inflow