Discuss the importance of cash flow in business


Several blogs have pointed out what they called "business myths." Some of these are:

1. To be successful you have to be first. This is also sometimes reworded as "the first in, wins" or "first mover advantage.".

2. To be successful, you have to be cheaper. Take an SBA (Small Business Administration) course, and they will tell you that if your only competitive point is to be cheaper, don't bother starting your business.

3. I ' m a good cook so I should start a restaurant. "Hey, this meal is fantastic! You should start a restaurant!"

4. The customer is always right. You should never tell a customer that you don't want them as a customer any more.

5. I ' ll just open my store, and people will stream in off the sidewalks and buy from me. This is also known as the "If you build it, they will come" approach to business.

6. It's a cool idea. Everyone will love this. Often focus groups provide such input to marketers-we love the idea.

7. Ours is better so we ' ll be successful. Quality always wins.

8. Adding more people to the project will make it go faster. This is a very common view in the software world.

9. Failure is bad. Failure is the opposite of success. This is why dodge ball has been banned in schools and soccer teams are penalized if they get more than five goals ahead of their competitors.

10. Knowledge is Power. In the knowledge economy, knowledge is the distinct capability that is necessary for success.

11. Cash flow is what really matters in business. Profit can just be a trick of accounting whereas cash flow controls whether you can stay in business. Many companies go out of business due to cash flow challenges, even though they were profitable on paper.

12. Having more customers is better than having fewer customers. Would you believe that some companies go out of business because they have too many customers or too much demand for their product?


1. Are these myths? Explain why each is either true or a myth.


3. Would you say that you should never form a partnership or a new business with close friends? Explain.

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Business Economics: Discuss the importance of cash flow in business
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