When cash (flow) is still king

MANY retail investors doing their investment homework are often impressed by a company's strong revenue and profit track record, not realising the peril that a seemingly healthy, profitable business can also go bust in a short period of time.

Strong revenues and earnings and yet ending wound up - isn't this an irony? Not really if one bears in mind that financial performance is not measured just by the income statement (also referred to as the profit and loss statement) and the balance sheet. Equally important, but often overlooked, is the cash-flow statement.

The biggest bugbear for companies - including the profitable ones - is poor and negative cash flows. Not taking heed of the early warning signs is to invite disaster.