Investing cash flow: This refers to the net cash generated from a company’s investment-related activities, such as investments in securities, the purchase of physical assets like equipment or property, or the sale of assets.In actively growing and expanding companies, positive cash flow is required to maintain business growth. Operating cash flow: This refers to the net cash generated from a company’s normal business operations.Negative cash flow indicates a company has more money moving out of it than into it. Positive cash flow means a company has more money moving into it than out of it. The list goes on.Ĭash flow can be positive or negative. While collecting a monthly installment on a customer purchase financed 18 months ago shows cash flowing into the business. Paying workers or utility bills represents cash flowing out of the business toward its debtors. When that same retailer sells something from its inventory, cash flows into the business from its customers. For example, when a retailer purchases inventory, money flows out of the business toward its suppliers. DOWNLOAD NOWĬash flow refers to the net balance of cash moving into and out of a business at a specific point in time.Ĭash is constantly moving into and out of a business. Here’s everything you need to know about cash flow, profit, and the difference between the two concepts.įree E-Book: A Manager's Guide to Finance & AccountingĪccess your free e-book today. For entrepreneurs and business owners, understanding the relationship between the terms can inform important business decisions, including the best way to pursue growth. Cash flow and profit aren't the same things, and it’s critical to understand the difference between them to make key decisions regarding a business’s performance and financial health.įor investors, understanding the difference between profit and cash flow makes it easier to know whether a profitable company is a good, long-term investment based on its ability to remain solvent in times of economic crisis. Yet, it isn’t uncommon for those new to finance and accounting to occasionally confuse the two terms. So actually it is a very big step of the total credit growth for merchant lending growing much beyond, not just for them but for others also is my personal opinion.ĭon’t miss out on ET Prime stories! Get your daily dose of business updates on WhatsApp.Cash flow and profit are essential financial metrics in business. So actually a large player entering in that would open up big market because of their trade data availability, they would be able to provide credit to millions of new merchant and they will become credit worthy which means that that would expand credit for every other player in the market itself. Having said that, the total credit gap for small businesses in India is staggering $400 billion of which the merchant financing is around $150 odd billion. When you do merchant lending as an independent unit, then it is like an unsecured loan, it becomes a little difficult because you do not know real movement of the cash flow. So obviously they can do this in very big sizes so they will have both focus on consumer as well as merchant. The merchant lending in ecosystem, the company which you are naming have a large ecosystem wherein on the retail chain you have merchants which are selling the material, which are buying the material so they will have the benefit of the trade data and basis that they can provide the credit. You should divide it in two part, merchant lending in an ecosystem and merchant lending as an independent business. Is there space for everybody? Is the economics very lucrative there or only risk is high? So if India's most valued and largest company is looking at that piece as an opportunity, you are working there for long. And so I want to understand how large is this opportunity? You work with all across SMEs, MSMEs, right? This one big lender, which is taking shape from a conglomerate gradually is also looking at that merchant lending opportunity. And in the lending space, what we pick up is that lending to merchants in their ecosystem be it retail etc. One thing I wanted to ask you as an industry participant, not as a representative of U GRO there is a very big kind of a big start-up which is being born in the lending space, perhaps the biggest start-up over one lakh crore in valuation which is being born tomorrow. So real collection efficiency should be seen and what is the resolution rate of that and that we are very good at that so it is more than 97-98%.īut in terms of the net loan origination, the first quarter we have the net loan origination of around 500 odd crore.
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