Risky customers – Watch out for signs of disappearing cash

Description

Abstract: Forget net income and book net worth. When it comes to monitoring creditworthiness, cash is king. Every business experiences occasional cash shortfalls — that’s why they need lines of credit — but borrowers with chronic cash deficits may be on the brink of default. This article shows how to scrutinize the statement of cash flows, inquire about significant changes, and find hidden sources of cash. A sidebar shows how the “cash gap” — a financial metric — works.