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What is Cash Flow?

Writer's picture: Shashwat GuptaShashwat Gupta

Cash flow is nothing but the total amount of cash-equivalents that is being entered and moved outside the business.

The ability of a company to create value for shareholders depends upon the ability to make positive cash flows.

Negative cash flow can weaken or destruct the company completely. Positive cash flow shows that there is an increase in the liquid assets of the company.

It further helps in settling debts, returning money to shareholders, reinvesting in the business, and paying expenses of the company.

There are two types of cash flows:

Direct Cash Flows

The direct cash flows include different kinds of cash payments and receipts such as cash receipts from customers, cash paid out in salaries, and cash paid to suppliers.


Indirect Cash Flows

The method of indirect cash flow takes the generated net income in a period and subtracts or adds asset and liability changes to decide the suggestive cash flow.


See You in the Next Blog, Bye


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