 Cash flows are very much important for any business organization because these are the cash flows that ensure growth and survival of any business organization in the contemporary world. Cash flows be a direct relation with the value creation and value creation is the primary job of any firm. The firms are required to create value for their owners. In this way, value creation is also the important job of contemporary financial manager. Manager create value through certain business activities like capital budgeting, financing and working capital management. Cash value creation is related with the creation of cash in higher amount than the amount paid off to the creditors of the firm. A firm can create value through two different means. The first is the buying of asset. The asset buying should be able to ensure the cash inflows more than the cash required to pay off to acquire these assets. The second means to create value is the selling of financial instruments to the bond holders or to the equity holders. In this way, the firm gets cash from these instrument holders and the company pay back cash to these instrument holders in the form of interest, principal and dividends. Now the cash received from these instrument holders should be more than the cash paid off to these instrument holders. If this is the case, then there is value creation by the firm. So we can see that cash paid to fund providers should be more than the cash inflows from these fund providers. On the screen, you can see mechanics that how a firm generates cash inflows and cash outflows. At first step, a firm when requires cash looks for financial markets and the firm issues certain securities, these securities may be debt securities for short term and long term and equity securities in terms of equity shares in these financial markets. From these markets, the firm gets certain amount of cash and invests this cash into its assets in terms of current and fixed both. When firm uses these assets in the firm, firm produces goods and sell these goods in the market. In this way, firm generates certain cash in the form of cash inflows. From this cash inflow, the firm pays certain amount of cash to the funds provider in terms of dividend and debt payment to these people. A portion of these cash inflows is paid to the government in the form of taxes and the residual amount is retained in the business as retention money. Now the cash inflows has been classified into three distinctive heads and the value will be created if the cash inflows are greater than in we can say that if the cash generated in A is greater than the cash payment in F, then only we can say that the firm has created certain value for its shareholders. As I have said earlier that there is a direct relation between cash flows and value creation. Now this value creation depends upon certain other things and the first is the cash flows identification. On the screen we can see that there is a little income statement in which sales are of 1 million dollars and the cost are 900000, there is a profit of 100000. Does this profit mean any cash flows? Let us see we see that in the screen it is clear that all sales are on credit basis but all cash flows are associated with the cost. So there is no cash inflows to the firms. So in order to create value there must be certain amount of cash inflows to the firm. The value creation also depends upon the timings of the cash inflows to the firm. Let us see there are two products, product A and product B. This project has a life of four years. In product B there are certain cash inflows throughout the life of the project but for product A there is only a cash inflow in the fourth year. Apparently the earlier collection of cash inflows is much better than the later arrival of cash inflows. So a dollar received today is much better than two dollars received tomorrow. The value also depends upon the risk associated with the cash inflows. Let's see an example of a company who is intended to invest two different regions. The one is Europe and the other is Japan. The company has estimated that there are three different situations, pessimistic, most likely and optimistic. And if we see the pessimistic situation then obviously Japan is riskier. But if we go for the optimistic we can see that the cash flows associated from the Japanese region are more appropriately better than the cash flows associated with the European region. So the company has these two types of regions and the risk involved in these two regions is obvious. The company must have a clear risk policy that how much amount of risk can the company bear.