Examples
| Description | Amount ($) | totals ($) |
|---|---|---|
| Cash flow from operations | +10 | |
| Sales (paid in cash) | +30 | |
| Materials | -10 | |
| Labor | -10 | |
| Cash flow from financing | +40 | |
| Incoming loan | +50 | |
| Loan repayment | -5 | |
| Taxes | -5 | |
| Cash flow from investments | -10 | |
| Purchased capital | -10 | |
| Total | +40 |
The net cash flow only provides a limited amount of information. Compare, for example, the cash flows over three years of two companies:
| Company A | Company B | |||||
|---|---|---|---|---|---|---|
| Year 1 | Year 2 | year 3 | Year 1 | Year 2 | year 3 | |
| Cash flow from operations | +20M | +21M | +22M | +10M | +11M | +12M |
| Cash flow from financing | +5M | +5M | +5M | +5M | +5M | +5M |
| Cash flow from investment | -15M | -15M | -15M | 0M | 0M | 0M |
| Net cash flow | +10M | +11M | +12M | +15M | +16M | +17M |
Company B has a higher yearly cash flow. However, Company A is actually earning more cash by its core activities and has already spent 45M in long term investments, of which the revenues will only show up after three years.
Read more about this topic: Cash Flow
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