UK Accounting Glossary
Revenue or expense streams that change a cash account over a given period. Cash inflows arise from one of three activities: financing, operations and investing. Cash flow can also be negative, if a business spends more money than it takes in during a given period of time.
In finance, cash flow refers to the amounts of cash being received and spent by a business during a defined period of time, usually tied to a specific project. In accounting, a cash flow projection sets out all the expected payments and receipts in a given period. Managers use cash-flow projections to arrange for employees and creditors to be paid at appropriate times.
Cash flow is a company’s net inflow or outflow of cash. A cash flow statement (formally known as the statement of cash flows) shows a company’s cash flow from its operating, financing, and investing activities during an accounting period, and it is now required under Generally Accepted Accounting Principles. More informally, cash flow often means cash flow from operations, which is computed as net income plus noncash charges, especially depreciation. Indeed, a quick definition of cash flow is net income plus depreciation. Analysts often emphasize cash flow, as opposed to net income, because cash is the most liquid and tangible asset, while net income necessarily includes charges and credits that do not affect the company’s bank account. Many analysts refine the concept of cash flow to mean “free cash flow,” the amount of cash available to the company after funding capital projects. In its simplest definition, free cash flow is net income plus depreciation less capital expenditures.
A properly structured life insurance policy is a safe investment tool and can be utilized by people to build up their wealth and plan for future cash flow
Once you own several properties, you can sell some of them for capital gains and keep some as rentals for a steady cash flow.
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This glossary post was last updated: 4th February 2020.