Strong Customer Loyalty Sustainable Competitive Advantages
Recurring Revenue Business Models Excellent Management Teams
Businesses that generate cash as they grow are able to reinvest cash in their own businesses to stimulate more rapid internal growth, make complementary add-on acquisitions without diluting existing shareholders, and distribute excess cash to shareholders. Strong cash flow also reduces the likelihood of financial distress, which is especially important when business or financial markets decline and new equity and debt financing is unavailable. In fact, companies with strong cash flow are able to take advantage of temporary market setbacks by repurchasing their shares in the public market at attractive prices, thereby increasing the ownership percentage of the remaining shareholders and enhancing their long-term returns.