Cash is often the most important resource for an organization. More cash is better than less cash, and cash now is better than cash later. As such, it is necessary for effective financial management to monitor cash flow.

That being said, many analysts and boards of directors focus so heavily on the income statement or the balance sheet that they forget the importance of cash flow statements. Cash keeps a company alive, and cash flow is an essential measure of an organization’s financial health. People, equipment, and supplies can’t be paid for with profits – only cash can.