Cash flow is a crucial pointer in a business’s financial health. See the different cash flows and learn how to calculate the net cash flow

Cash Flows

Strategic information on the operation of the activity, its financing model, and investments. In a company’s financial accounting, the cash flow is one of the most critical indicators , since it provides material on income and expenses, allowing the solvency and liquidity of the business to be determined. Its position lies in the control of the cash flow statement, since thanks to it, the capacity of a business to generate wealth can evaluate, and it helps to make decisions. The Financial Controller carries out this work in the company.

What Remains Cash Flow?

Cash flow mentions to information about the resources that a company generates, both inflows and outflows, in a specific period. It indicates the net accumulation of liquid assets during a particular period.

Kinds Of Cash Flow

  • Functioning cash flow.

Amount of cash that arrives and leaves the business through operations directly related to its activity, without taking into account financing costs.

  • Asset cash flow.

Amount of money go in or spent according to the company’s investments, generally in financial products that can easily convert into liquidity, as well as in the purchase of real estate and tangible and intangible fixed assets.

  • Financial cash flow.

Cash movements of the company’s financial investments related to its activity, such as the payment of credits or the cash received from the issue of shares. How to calculate cash flow?

Net cash flow refers to cash flowing in and out of business. It calculate by adding the net profit to the amortizations made in the historical through the following basic formula:

Cash flow = Net profits + Amortizations + Provisions + Accounts payable – Accounts receivable

If the cash flow report is positive. It indicates that the company’s income has been higher than the expenses, but if it is negative. It has spent more than it has received.

If you are attentive in delving into financial, economic, and office concepts. Our MBAs and Masters in Finance will come in handy. You will be able to work as an administrative director or director of a company’s financial department, work as an investment analyst, or keep the accounts of your own business.

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