However, the level of cash flow is not an ideal metric to analyse a company when making an investment decision. It has three main categories – operating cash flow which includes day-to-day transactions, investing cash flow which includes transactions which are done for expansion purpose, and financing cash flow which include transactions relating to the amount of dividend paid out to stockholders. To analyse where the cash is coming from and going out, cash flow statements are prepared. If the difference is negative it means that you have less amount of cash at the end of a given period when compared with the opening balance at the starting of a period.
If the difference is positive, it means you have more cash at the end of a given period. It is calculated by subtracting the cash balance at the beginning of a period which is also known as opening balance, form the cash balance at the end of the period (could be a month, quarter or a year) or the closing balance. It gives a snapshot of the amount of cash coming into the business, from where, and amount flowing out.ĭescription: As discussed cash flows can either be positive or negative. Cash flow analysis is often used to analyse the liquidity position of the company. Definition: The amount of cash or cash-equivalent which the company receives or gives out by the way of payment(s) to creditors is known as cash flow.
0 kommentar(er)
