A. Why is it important to understand the factors that impact cash flow?

Cash flow issues are notable issues in most companies that fail. Companies need to monitor their cash flow to meet current obligations. Monitoring cash flow indicates where cash comes from and how it is spent. Cash pays salaries, suppliers and taxes, therefore running out of cash by having it locked up in other assets (accounts receivables, inventories, etc) could stop an otherwise promising business endeavor. Cash flow statements can determine a business’s ability to pay interest and principal to creditors and dividends to shareholders.