Finimpact

Frequently Asked Questions (FAQ)

What Is the Meaning Of Cash Flow?
Cash flow is the amount of cash (or cash-equivalent) that a business receives or gives out as payments to creditors. It is the amount of cash going in and out of business.
What Is the Difference Between Cash Flow and Profit?
Cash flow and profit are not the same. Cash flow is the net balance of cash that moves in and out of business in a specific period. Profit is the balance that remains when all the operating expenses are subtracted from the revenue: profit is what is left when the books are balanced, and all the expenses are paid.
Why Is Cash Flow Important?
As cash flow is the inflow and outflow of money from a business, it is vital to the business’s financial health. The positive cash flow indicates the business is growing and is in excellent financial health, while the negative cash flow indicates that the business’s financial health is decreasing.
How to Calculate Free Cash Flow?
The free cash flow shows the amount of cash left over after all the operating expenses and capital expenditures are paid. It is the money the business can invest in growth, paying dividends, and more. There is a simple formula to calculate free cash flow:

Free Cash Flow = Operating Cash Flow – Capital Expenditures
How to Calculate Operating Cash Flow?
The operating cash flow is the amount of cash generated by normal business operations. It indicates if a company can generate positive cash flow to maintain and grow its operation or need an external finance source for expansion. There is a simple formula to calculate operating cash flow:

Operating cash flow = Net income + non-cash expenses – increase in working capital

About the Author

Daniel Lewis

Daniel Lewis

MBA accredited investment professional

Daniel Lewis is an MBA accredited investment professional who wants to assist small business owners to gain access to finance. After going through many channels for funding, Lewis has found that getting the first loan right is vitally important for future success.

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