When investing there are major startup costs into a business that must be considered.
A new business may be cash-rich, as in what it is selling is making profit, however profit may be low due to the costs of rent, fixed assets, training, recruitment, and supplies. Investment affects cash flow changes when it buys and sells investments, and when it obtains finance for investments.
Cash flow is vital for investment opportunities because poor cash flow results in missed opportunities for investment. Effective cash flow management and product portfolio management are therefore necessary prerequisites before the business can turn an investment into profit for the owners.
