Concept in Definition ABC

On economy Y finance, Cash flow , is the name used in the English language to refer to the cash flow or flow of funds or cash, as it is also known; the cash flow It implies the inflows and outflows of cash or cash, in a certain period and therefore constitutes a more than concrete indicator of the liquidity held by a certain company.

So, from the cash flow we can know the statement of account, how much cash is left in it after expenses, payment of principal and interest.

It should be noted that cash flow is an accounting statement that presents information on all movements of cash and its equivalents.

Meanwhile, the study of the cash flow of a company can be used for decide different issues, including: liquidity problems, for analyze the viability investment projects, to measure the cost effectiveness of a business, among others.

Cash flows can be classified as follows: operational cash flows (cash received or expended, as a product of economic activities), investment cash flows (cash received or expended taking into account capital investment expenditures that will tend to benefit future business, for example the purchase of new equipment) Y

cash flows from financing(It is the cash received or expended, resulting from financial activities such as the receipt or payment of loans, issuance or repurchase of shares, payment of dividends, among others)

If the company makes a projection of the aforementioned statements, it can foresee whether in the future it will have the necessary cash to cover its expenses and also obtain profits.

From the aforementioned, it can be inferred that the analysis of cash flow turns out to be an extremely valuable question for small and medium-sized companies. companies that are usually affected by lack of liquidity, to meet those needs more immediate. This way, forecasts can be made and it will help to avoid those actions of urgency that, in the long run, will generate financial complications, such as having to resort to a financier to apply for a loan.

Cash flow will definitely make financial management effective because it contributes directly to making the best decisions and facilitates the control of expenditures in order to improve the cost effectiveness.

Topics in Cash flow