Cash Flow is the movement of money into or out of a business, project, or financial product.

It is usually measured during a specified, limited period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company’s value and situation.

  • to determine a project’s rate of return or value. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return and net present value.
  • to determine problems with a business’s liquidity. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash even while profitable.
  • as an alternative measure of a business’s profits when it is believed that accrual accounting concepts do not represent economic realities. For instance, a company may be notionally profitable but generating little operational cash (as may be the case for a company that barters its products rather than selling for cash). In such a case, the company may be deriving additional operating cash by issuing shares or raising additional debt finance.
  • cash flow can be used to evaluate the ‘quality’ of income generated by accrual accounting. When net income is composed of large non-cash items it is considered low quality.
  • to evaluate the risks within a financial product, e.g., matching cash requirements, evaluating default risk, re-investment requirements, etc.

Cash flow notion is based loosely on cash flow statement accounting standards. the term is flexible and can refer to time intervals spanning over past-future. It can refer to the total of all flows involved or a subset of those flows. Subset terms include net cash flow, operating cash flow and free cash flow.

 

Categories: Podcasts

Omar Uddin

Entrepreneur. CEO of UVision

My name is Omar Uddin and I'm Founder & CEO of UVision.

I'm an engineer, inventor, advisor and a serial entrepreneur with over 20 years of experience spanning public & private sectors building smart, scalable & secure technology solutions including web, mobile, cloud, IoT & AI based solutions.

I help startups and enterprise companies with scalability, security and quality issues within their platforms and build intelligent, next generation technology products. I advise high tech startups, businesses, enterprises, government contractors as well as corporations such as Microsoft & Google.

I focus on doing useful things with technology and AI to drive exponential impact for the future of humanity.

My Profile - Book a time to talk with me Can I help you transform, innovate & grow?

Leave a Reply

Close your account?

Your account will be closed and all data will be permanently deleted and cannot be recovered. Are you sure?

Are you sure?

By disagreeing you will no longer have access to our site and will be logged out.

%d bloggers like this: