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In minimum some phases will be stopped, to avoid such situation you need to assign budget B to feed the shortage
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In the absence of any support from financial facilities, the first obvious outcome of operating cash flow shortage would be to face operational problems such as increase in days creditors as to meet liquidity crunch the organisation will try try to stretch creditors in the short run. If the situation continues then next stage would be curtailment of some operations and running the balance operation on full optimum capacity. In case of new project, the first response would be delay in project.
The remedy in short term is to limit the operation or try to stretch the creditors and meanwhile bridge the gap with any running finance facility or with bill discounting from banks. In the long run have to review all operation to make it viable and closing non profitable operations.
The statement of cash flows one of the most important financial statements that help users to identify the financial conditions of the company the subject of analysis.
The importance of the statement of cash flows is that it shows the monetary effect of all activities undertaken by the company during the financial statement with the nature of the impact of being a cash flow inside the company or out of the company,
The division of this list of the cash flows within the activities of its common nature helps to identify strengths and weaknesses in terms of the company's ability to generate cash which is the item that will be used to repay liabilities and finance expansions and the distribution of profits in both the short-term or long-term
The statement of cash flows define movement of cash on three levels
* - Cash flows from operating activities
define cash flows generated from the main activities carried out by the institution
* - Cash flows from investing activities
define cash flows that include the sale and purchase of long-term assets
* - Cash flows from financing activities
define cash flows that related to access to the resources of the owners or returned to them, with regard to obtaining financing from lenders or loan repayments to them.
so
The banks consider the statement of cash flows is strong evidence of the ability to repay the loans the company in short- or long-term .
