¶ … financial statements by business entities. The purpose of this is so that one can understand about the business cash, how the business acquired or generated it, how it was used and in what ways and tomorrow's business plans, financial position of a business, performances and its position. The paper will go ahead to analyze if there is any significance of cash for the survival of a business and the impacts of the various financial sets. The arguments that will prevail will be based on the importance of the different financial statements to a business survival.
Cash is a crucial constituent of a business and I do agree that a business cannot survive without it. 'As a matter of fact the main aim and goal of a business is to generate cash and profits not only in the short run but also in the long-term.' (Minnery, 2006) Every business has everyday costs which must be met with cash in order to keep the business moving. These costs include but are not limited to wages and salaries, paying creditors, settling of taxes such as VAT and PAYE. A business can never escape to pay for these expenses and failure to do so amounts to defaulting something that is likely to destroy the business, it would also amount to gross breach of faith to employees if their wages and salaries are not settled, and also result to insolvency if the company is unable its taxes and to the creditors who supplies the business, they are likely to terminate supplies.
To escape insolvency, a business must have cash so as to aid pay its creditors and on time. Failure to meet creditor's expectations has serious consequences and it can result to prosecution. Therefore to survive, as much as a company is in need of making profits having cash to pay debts is important. Equally, a profitable business should have its profit reflected in its cash flow. If it fails to generate cash the end results are likely that it will inevitably run out of money. Minnery, (2006) points out to the importance of cash in a business by saying 'Cash is very imperative to a business both in the short and...
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