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On the financial management concept of "cash is the king"

Tongfeng Chen, Wang Chang, Hu Fagang

At present, many Chinese enterprises lack well understanding on cash flow. They still attach great importance on profitswhile ignoring cash flow. However, a number of enterpriseswent bankrupt during this financial crisis. The direct trigger for bankrupt was enterprise’ funds tension, which made cash flow couldn’t turnover smoothly. Therefore, cash flow is extremely important for enterprise. This paper analyzes the status of cash flow in enterprise’s financial management, and compares it with enterprise’s accounting profits. It is pointed out that cash flowismore importance than profits in economic activities. It determines enterprise’s value. It is proved again that, the financial management concept of “cash is he king” is a magic weapon which enables enterprises to successfully get through the financial crisis.