3. Debt & Cash Flow
Debt is the total amount of money owed by a company. While debt can finance growth
during times of prosperity, it can also become a burden if a company is having financial
difficulties. Cash flow is the amount of money that is moving in and out of a business. It is a
good indicator of a company’s financial health, because it is more difficult for a company to
manipulate than earnings. However, a better analysis would require the analysis of both debt and
cash flow, i.e. the company’s debt obligations in relation to its cash flow.