Cash Flow

Cash Flow (CF) is a term that refers to a difference between cash income and cash expenditure for reporting period. In the cash flow statement there are presented real cash flows. Cash flow is based on the time discrepancy between economic transactions and their financial capture.

Use of Cash flow in practice: Cash flow is recorded in the cash flow statement as a part of financial statements. Cash flow is important for liquidity management.

Cash flow can be distinguish according to basic activities:

• Operational cash flow
• Investment cash flow
• Financing cash flow

Cash flow determination:

• Direct method
• Indirect method

Term cash flow can be seen as:

• Free money supply that is available to the business (static concept)
• Future detachable revenue that an investor can get when investing to the business (dynamic concept)