Cash flow refers to the movement of cash into and out of a business, reflecting the inflows and outflows of capital within a specified period. It is a critical indicator of a company's financial health and sustainability.
Cash inflows are the cash receipts of a business, which include transactions such as sales of trading stock, receipts from debtors for credit sales, and disposals of fixed assets.
A Cash Receipts Journal is a specialized accounting ledger used to record all cash inflows received by a business, such as payments from customers, cash sales, and other receipts. Each entry is chronologically organized to ensure accurate tracking and reconciliation.
A cash-generating unit (CGU) is a subset of assets, liabilities, and associated goodwill within a reporting entity that contributes to generating cash inflows in a largely independent manner from other parts of the organization.
A consolidated cash-flow statement provides a comprehensive overview of cash inflows and outflows from a group of entities, combining individual cash-flow statements subject to various consolidation adjustments for accurate financial reporting.
Cost-Benefit Analysis is a technique used in capital budgeting that evaluates the estimated costs against the expected benefits of a proposed investment.
Discounted Payback Method is a method of capital budgeting in which managers calculate the time required for the forecasted discounted cash inflows from an investment to equal the initial investment expenditure, considering the time value of money.
Negative cash flow is a crucial financial metric that indicates an excess of cash outflows over cash inflows for a company during a specific period.
Net cash flow refers to the difference between the cash that enters (cash inflows) and exits (cash outflows) an organization during a specific financial period. It can either be positive, signifying a cash surplus, or negative, indicating a cash deficit.
A method of capital budgeting where the value of an investment is calculated by determining the total present value of all cash inflows and outflows minus the initial investment cost.
In a discounted cash flow (DCF) calculation, a standard cash flow pattern is characterized by an initial cash outflow followed by subsequent cash inflows, with no net cash outflows in subsequent years. This pattern, though useful in projections, is relatively rare in practice.
The Statement of Cash Flow is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period. Essentially, it acts as a reconciliation of the opening and closing cash balance for a company.
