Market Performance: February 05, 2024.

Stocks fell Monday as Treasury yields spiked higher on concerns that the Federal Reserve may not cut rates as much as expected. Lackluster results from McDonald’s also dampened investor sentiment.

The Dow Jones Industrial Average dropped 274.30 points, or 0.71%, to settle at 38,380.12. The S&P 500 slipped 0.32% to close at 4,942.81. The index hit a record high last week as Big Tech stocks moved higher. The Nasdaq Composite edged down 0.2% to end at 15,597.68.

The yield on the 10-year Treasury note was last up more than 13 basis points to 4.166% as investors assessed a fresh batch of strong economic data that suggested rates may stay elevated for longer than anticipated. The benchmark yield traded around 3.81% last week.

Unlocking the importance of cash flow: A key to business success

Cash flow is the movement of money in and out of a business. It reflects the liquidity of a company and provides a real-time snapshot of its financial health.

It encompasses two main components: cash inflows and cash outflows. Cash inflows are the sources of money coming into the business and typically includes revenues from sales, investment income and loans. Cash outflows are the expenses or payments going out and includes operating costs (such as salaries and rent), investments in assets, and any other financial obligations.

Managing cash flow effectively is crucial for ensuring financial stability and building a strong financial foundation for the long-term success of the company.

Liquidity management

Positive cash flow refers to when a businesses cash inflows exceed the cash outflows, a sign of a healthy business. This means the company can cover its everyday operational costs and financial commitments such as bills, salaries and rent. Having effective cash flow management helps optimise working capital which means a business can reduce excess cash tied up in assets or inventory and use it more efficiently to generate revenue.

Having positive cash flow also helps a business avoid insolvency or bankruptcy. While running a business the goal is never to become bankrupt, however by not regularly monitoring the cash flow it’s possible to be operating on a negative cash flow without realising.

Don’t Be a Borrower If You Can Help It

Does having more money make you happier? Most Americans think so, yet economists continue to debate the question. A 2010 paper by two Nobel laureates concluded yes—but only for those earning up to about $75,000 a year. In 2021, an economist revisited the issue and found that well-being may go on increasing for much higher income levels as well.

My own work argues that what matters is not how much you have, but what you do with it: Happiness doesn’t rise when you buy stuff, but rather when you use your money to pay for memorable experiences or time with people you love, or when you give it away to causes you care about.

All that aside, there is one thing you can do with money that is very likely to raise your unhappiness: Borrow it without clear resources to repay it. Benjamin Franklin was onto something when he wrote in 1757, “Sleep without Supping, and you’ll rise without owing for it”—in other words, being a little hungry from time to time is better than cadging money to buy dinner.

The research shows that Franklin was almost completely right: As tempting and as easy as it is to borrow money “on credit” to fund your unsecured consumption, this type of indebtedness almost always lowers your well-being.

Alternative Investing