Cash flow management and strategic responses that create corporate value: Some observations

Abstract

The purpose of this paper is to explore the extent to which cash flow management, the value of the organisation, and strategic decision making are correlated. A cash flow model is proposed based upon four levels of strategy decisions. The business press has been monitored for a period of twelve months to find evidence of linkages between cash flow management and strategy decisions. There is sufficient evidence to suggest that a number of organisations do consider cash flow management and strategy decisions as related and that both have an impact on the value of the organisation. This project was designed to validate the notion of an awareness of the links between these important aspects of corporate decision making. The scope of the findings has been limited by the number and content of the material; however further research using case studies as a primary method of approach is justified. The evidence presented suggests a logical approach among a number of companies when seeking to increase their value. It suggests an increasing awareness of the importance of cash flow by senior management. As the concept of network based business structures expands the role of the NPV of future cash flows generated from strategic and structural decisions is likely to become the preferred measure of potential performance criteria.