narrow focus can provide

Narrow focus means concentrating on a small area, on a few products or a single product in this context.

"Leave a company susceptible to major fluctuations in cash flow" means that the company's income might rise and drop dramatically within a short period of time. Cash flow is an expression of how much money an individual or a company takes in within any given period of time. Cash flow is considered an important indicator of economic health because, even if one's current average income is somewhat low, cash flow--the rate at which one takes in money--could be substantial, allowing for the investments needed to expand one's business, or to practice economies of scale. Suppose i started out the year with a left-over debt from the previous year. Suppose further that the year got of to a slow start in terms of sales. If i can increase sales, and generate a healthy cash flow, those other factors won't matter much. So, if by the middle of the year i have a good cash flow, i can practice economies of scale. I can buy the materials i need to make my product in larger quantities, at a lower price, and reduce the cost per unit for my product. Looking simply at the income and debts since the beginning of the year, my performance may not look good, because the debt from the previous year and the early poor performance produce a low average income. But if i have increased my sales, and therefore increased my cash flow, increased the rate at which money is coming, and that allows me to take advantage of the savings in economy of scale, then by the end of the year, i will not only have sold more of my product, but will have had a greater profit from the sale of the product, since it would now cost me less to produce. That is why cash flow is considered a better indicator of business performance at any given point in a fiscal year than simply the average profit and loss for the entire year.

Many financial institutions and investors look at cash flow, at the rate at which money comes in, as an indicator of the financial health of a company. It conditions how willing, for example, lending institutions will be to make loans, and whether or not the rates of interest offered will be favorable. The perception of cash flow can condition whether or not investors will invest in a company--if cash flow is or appears to be good, then more people might be inclined to invest in that company. Therefore, the statement that someone's cash flow is subject to major fluctuations points to a potential significant problem in the image of a company's financial health. The author of this short piece is saying that having a diversified product line is more likely to lead to a good cash flow, and a predictable cash flow, than concentrating on a few or a single product would do. The author is equating a stable and healthy cash flow from a diversified product line with better long term prospects in business competition.

Re: narrow focus can provide



Basically the whole thing means don't put all your eggs in one basket, if a company makes and sells only one product it can have advantage over other companies but if the product doesn't sell then no money comes in and that is a problem.

narrow focus is just focusing on one thing instead of many

Very simply:

A company can sell just one product, but it should be careful because if that one product does not sell well, not enough money will come in make a profit.