Revenue growth and profitability are probably the most common measures of a business s strategic success. Growing faster than the competition generally translates into increased market share and a stronger competitive position. Cash is king because companies that generate more cash can fund growth internally at lower costs than those forced to use external funding sources. Poor cash management, alas, can cause a death spiral.
Cash is king because it reflects management s ability to use earnings beneficially.
Companies with identical revenue growth and profitability can show wide variations in the amount of cash each generates. Cash is king because it is the foundation for shareholder value. In the past, investors looked at profits and earnings per share. These two measures reflect the difference between the cash flow a company generates and its cost of capital. The more cash generated relative to the cost of capital, the greater the return to shareholders.