Quoth the Banker Watch Cash Flow Summarize the poemSolutionT

\"Quoth the Banker, ‘Watch Cash Flow.’ Summarize the poem

Solution

The poem is about a business person who is looking for a loan for his company. And for that a banker visits him, to check the financials of his company and some other aspects before providing loan.

The peom begins where the business man using his accounting knowledge is trying to manipulate the accounts through some tax changes. And a banker arrives at his place.

Banker saying \"cash flow\" and says that though your bottom lines i.e profits are not good but your receivables are high and this is not a good thing, all that matters is cash flow.

also the inventories are quite high and interest payments are pending. Company is debt ridden and so does the banker says pay the interest.

Then he looked at non-cash items and saw that there has been underreporting of depreciation to reduce the expenses on accounts and he is annoyed with that.

Then having asked for a loan, banker said the interest rate would be very high for you as there are lots of errors in your acccounts. the inventory is increasing and so are the receivables, bottom lines are not good and there has been less of depreciation. Also he said he needs some security from the assets as a collaterla for the loan.

At the end he says whatever are your accounts, its very important to have a note of the cash flow statements and watch the cash flow. The poem is all about knowing the cash flows where all these things are reported. Banker said having looked upon the cash flow statements he noticed that all the cash has been consumed in the above things. Also depreciations are underr reported. The company is illiquid. Due to these many consumptions the previous interest payments are pending too. Despite of this if you want more loan then you need to pay more interest with security to me.

So its very imp to watch the cash flow statements before investing in any company