Comments on: Profit and Cash Flow Explained http://blog.steverrobbins.com/bizblog/profit-and-cash-flow-83 Exploring business and its impact on life with Stever Robbins Sat, 22 Nov 2008 05:52:51 +0000 http://wordpress.org/?v=2.6.3 By: Stever http://blog.steverrobbins.com/bizblog/profit-and-cash-flow-83#comment-1037 Stever Mon, 28 Jan 2008 15:17:38 +0000 http://blog.steverrobbins.com/bizblog/profit-and-cash-flow-83/#comment-1037 Good or Bad cash flow depends on how much you invested and what kind of return you can get with other investments. You can look at cash flow as a return on your investment. If you invest $1000 to create a business that is giving you $100 of cash flow a year, you can think of that as 10% cash return on your investment. It's important, though, to add in to cash flow any expenses you know will have to be made but aren't being made this year. If the above business requires an additional $50 investment every 5 years, say to refurbish a piece of machinery, then your return is on average the $100 cash minus $10 ($50/5 years) or $90 per year, or 9%. That may still be an investment worth doing, but don't be surprised when you make less than 10%/year overall. The periodic-but-required expenditures lower the return, even if they don't happen in the current year. Good or Bad cash flow depends on how much you invested and what kind of return you can get with other investments.

You can look at cash flow as a return on your investment. If you invest $1000 to create a business that is giving you $100 of cash flow a year, you can think of that as 10% cash return on your investment.

It’s important, though, to add in to cash flow any expenses you know will have to be made but aren’t being made this year. If the above business requires an additional $50 investment every 5 years, say to refurbish a piece of machinery, then your return is on average the $100 cash minus $10 ($50/5 years) or $90 per year, or 9%. That may still be an investment worth doing, but don’t be surprised when you make less than 10%/year overall. The periodic-but-required expenditures lower the return, even if they don’t happen in the current year.

]]> By: Kelly http://blog.steverrobbins.com/bizblog/profit-and-cash-flow-83#comment-1036 Kelly Mon, 28 Jan 2008 00:39:42 +0000 http://blog.steverrobbins.com/bizblog/profit-and-cash-flow-83/#comment-1036 Thanks for the explanation. When trying to evaluate a business, how is one to determine good versus bad cash flow - and how does one know what the owner receives for payment. Thanks in advance. Thanks for the explanation. When trying to evaluate a business, how is one to determine good versus bad cash flow - and how does one know what the owner receives for payment. Thanks in advance.

]]> By: bertrand http://blog.steverrobbins.com/bizblog/profit-and-cash-flow-83#comment-687 bertrand Mon, 01 Oct 2007 12:58:30 +0000 http://blog.steverrobbins.com/bizblog/profit-and-cash-flow-83/#comment-687 Fabulous..Thank you for enriching my vocabulary. So clear! I just gave a voice coaching session to beginning 6 graders and was mindful of simplicity and clarity. Turned out it was my best class for any age. Thank you again for doing the same for me, Sincerely, Bertrand Fabulous..Thank you for enriching my vocabulary. So clear!
I just gave a voice coaching session to beginning 6 graders and was mindful of simplicity and clarity. Turned out it was my best class for any age.
Thank you again for doing the same for me,

Sincerely,
Bertrand

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