Here’s an interesting puzzler. How is it possible for a profitable business to be growing and failing at the same time? The all-important answer to this conundrum lies in the company’s cash flow.
Hot product companies that experience rapid sales growth have to purchase and assemble inventory months in advance of shipment to retailers and distribution partners. This eats up a company’s cash. And just when customers get around to paying for past product shipments, the company has to invest its available cash in the next inventory production run. Fast-growing companies also pay out higher sales, taxes and insurance bills too. This is how too much success can quickly lead to an empty bank account.
Sadly, if a commercial bank doesn’t step in to help a company catch up, ...Read more