Cash flow


 

Cash flow is defined as a positive, periodised surplus of funds from the  business activity of a company. Cash flow is an important indicator of a business's solvency and internal financing potential. A cash flow statement (see capital flow statement) may be created as a past statement or a plan statement.  

Three types of cash flow are recognised:

 

1. Operative cash flow

Payment surpluses attained as a result of ongoing business activity

2. Investment cash flow

Outflow of funds for investments minus funds surpluses from disinvestment

3. Finance cash flow

Payment surpluses and outflow as part of self-financing and credit financing

 

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