Cash flow is a term usually used to define a revenue of expense stream that changes an account over time, or the general amount of cash received and used by a company during a specific period. Cash flows are essential to solvency and can be a record of past events or events expected to happen in the future. It is essential to an entity’s survival as it determines whether or not there is sufficient cash to pay off creditors. Cash flow is not the same as taxable income as many things can be subtracted from cash flow such as loan income, depreciation, and amortization deductions and things can be added to it such as retired loans and long-term assets.
Cash flow is a generic term used to describe different ideas depending on the context. In accounting, for example, there is the statement of cash flows which is used to determine a company’s ability to invest further cash into creating a profit. This statement is different from an income statement as it is only concerned with actual cash on hand and not cash owed. Cash flow is derived from three major sources: operating activities, investing activities, and financing activities. Operating activities include cash used during the regular course of business. Investment activities include cash used or earned from investments or acquisitions. Financing activities involves cash used or earned from financing, Loans, stock, or dividends.
The Cash flow statement is one of the four main statements a company produces for accounting purposes. There are many reasons for measuring cash flow such as: to evaluate the state a business is in, to determine if there are any liquidity problems, to project a rate of returns, and to measure the income or growth of a business.
Cash flow matching is when a company or person matches their cash inflows to their cash outflows. It is an effective but impractical method of doing away with interest rate risk. If an investment has a positive cash flow its market value will increase or decrease inversely with the spot interest rate of maturity. An investment is matched when every cash outflow is equal to every cash inflow on the same date and vice versa.
Whenever cash flow is mentioned in the media, what is being referred to is often operating cash flow and this can cause a misleading view of the figures as investment activities and financing activities aren’t’ accounted for. Businesses can often reclassify financial and investment activities as operating activities in order to provide a more positive outlook of their figures. This can be done by: selling receivable for cash, not paying vendors for a couple weeks after period end, buying leased equipment, etc.
As you can see, cash flow is a complex subject and the term cash flow covers many different subjects. The term’s meaning is relative depending on the specific context surrounding it when it’s brought up. Its general meaning regardless of subject concerns on hand cash paid and earned during a specific period.
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By: bernadette | 11-07-2008
what is the best finance company in the n.y. area that i can get a small loan with. I don't have the best credit.
Bankruptcy for llc business
By: Carol | 11-07-2008
How to file bankrupcy for business that is an llc. Supply house debt/credit card debt/loan debt/vehicle debt. Just not making enough profit to support all debt. What is the procedure? What happens?Really desperately need an answer. Thank you. Carol.
My husband and I have initiated a Chapter 7 ...
By: kathi | 09-07-2008
My husband and I have initiated a Chapter 7 because we owe more than$120,000 in unsecured debt. After we pay the attorney fee, this case will be filed. In the meantime, we have gotten behind on our mortgage by 3 months. We want to keep the house, and the car. Is it possible to file both Chapter 7 to eliminate the credit card debt, etc., and file a Chapter 7 to keep the house and car? I know that a Chapter 13 can be converted to a Chapter 7, but can they be done simultaneously/ Or, could we do the Chapter 7 first and then a Chapter 13 to save the house?
Bankrutpcy completed. What do I do now?
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I have 1 more payment and I will have my chapter 13 bankrupty paid. What steps do I need to take to make sure everything is reported and what are the next steps to rebuilding my credit? It has been a very long five years and I want to make sure I do everything I need to do to be back on the right track.
Refinanceing my home I have discovered that a ...
By: driseball | 02-07-2008
Refinanceing my home I have discovered that a fictious phone number was used to secure my loan, not working at the time or now, a phone number was used in order to qualify me for the loan, does that constitude fraud, and whom do I contact to obtain information about this ? A fictious work number was used !!
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My exhusband and I file bankruptcy in aug. 03 but since then I have become ill and I have divorced. I have an extensive amount of medical bills as well as credit. Would the bankruptcy court allow me to file a chapter 7 again given my circumstances. I'm in about 75000.00 worth of dept and I doubt if it would make much since to file a 13 given that the monthly payments would probably be extremely high. Someone please give me some suggestions. My email address is nikgeo11775@yahoo.com. I'm not on here very often so please email me the answer, thank you.
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