Indiana University School Of Continuing Studies

Small Business Finance I & II
Indiana University
Division of Extended Studies 1982
Course by Randal E Suttles, CPA

An extract from Lesson One:

To summarize the key points of cash management:

1. Short-term solvency (liquidity) can only be maintained through a good cash flow tracking system. You can borrow for the short term if a liquidity crisis arises. But to know how much you need, you must keep good records.
2. Long-term solvency is only possible if net cash flow from operations, excluding borrowings or money invested by the owners, exceeds loan payments. To avoid bankruptcy, the owner must survive in the short term to reach the long term.

An extract from Lesson Three:

Cash Flow eventually equals income or loss. As I said in Lessons 1 and 2, although profits and losses are not equal to actual cash flow right away, they do eventually generate cash (profit) or require cash (loss). But, from a financial management standpoint, you need to know both.

September 14, 2008 note from Randal E Suttles, CPA: I wrote this course for Indiana University more than 25 years ago. I put what I wrote then in bold typeface now. The principles of financial management don’t change.