Chapter 7 looks at ways of controlling operating expense, that is, selling, general and administrative, or SG&A. The focus is on both expense and expenditure, which are considered from two key perspectives, cost control and capacity planning. Chapters 8, 9 and 10 look in turn at accounts receivable from customers, the inventory we hold for either sale or further

work, and, last among so-called working-capital items, accounts payable to our suppliers. We explore both the shortand long-term implications for cash flow in how these three issues are managed. In Chapter 11, long-term investments made for purposes of enhancing productivity under the heading
of capital expenditures are examined from a financing, timing and strategic perspective, with emphasis throughout on the cash-flow dimensions.

PART THREE: CASH FLOW AND BUSINESS MANAGEMENT. This section consists of four forward-looking chapters that use the seven cash drivers as the basis for describing, testing and fine-tuning plans for growing your business. Chapter 12 follows up with a nuts-and-bolts case study demonstrating the logical application and calculation of the cash drivers. It does this for both a sample company’s recent history and a projection of its
near-term future. The projected values of the cash drivers are used to teach a method for building the forecasted periods’ cash-flow statements. Chapter 13 goes beyond the cashdriver assumptions and the mechanics of projecting by taking a more strategic perspective. The point of this chapter is to
think about the business using the cash drivers as a strategically consistent set of measurable business goals centered in cash-flow dynamics.

Chapter 14 moves to the important link between cash flow and company value. This view begins with a look at the risk levels borne by both your lenders and your stockholders. Regardless of whether these are major institutions or just the friends, relatives and co-workers who gather at the annual picnic, the specific risks to be considered under valuation are always those associated with market-value erosion. Operational risks, of course, are implicitly covered in the discussions of cash drivers. Company valuation is then discussed in the context ofa cash-low calculation methodology, with particular attention to the risk of loss. Such risk may be to holders of either debt or equity. The methodology of valuation presented is consistently cash-flow centered, as are the related risks of loss, volatility and inadequate growth. Chapter 15 provides a brief summary of key concepts along with some suggestions for beginning to integrate the cash-drivers mindset into your business life. Now let’s begin with an overview of cash flow.

Taken From : Cash Rules