Editing Cash flow (section)

==Cash flow analysis==
{{Citation needed section|date=January 2024}}
Cash flows are often transformed into measures that give information e.g. on a company's value and situation:

*to determine a project's [[Accounting rate of return|rate of return]] or value. The time of cash flows into and out of projects are used as inputs in financial models such as [[internal rate of return]] and [[net present value]].
*to determine problems with a business's [[Accounting liquidity|liquidity]]. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash even while profitable.
*as an alternative measure of a business's [[profit (accounting)|profit]]s when it is believed that [[accrual accounting]] concepts do not represent economic realities.  For instance, a company may be notionally profitable but generating little operational cash (as may be the case for a company that barters its products rather than selling for cash). In such a case, the company may be deriving additional operating cash by issuing shares or raising additional debt finance.
*cash flow can be used to evaluate the 'quality' of income generated by [[accrual accounting]].  When net [[income]] is composed of large non-cash items it is considered low quality.
*to evaluate the risks within a financial product, e.g., matching cash requirements, evaluating default risk, re-investment requirements, etc.

Cash flow notion is based loosely on cash flow statement accounting standards. The term is flexible and can refer to time intervals spanning over past-future. It can refer to the total of all flows involved or a subset of those flows.

Within cash flow analysis, 3 types of cash flow are present and used for the cash flow statement: 
*Cash flow from operating activities - a measure of the cash generated by a company's regular business operations. Operating cash flow indicates whether a company can produce sufficient cash flow to cover current expenses and pay debts.
*Cash flow from investing activities - the amount of cash generated from investing activities such as purchasing physical assets, investments in securities, or the sale of securities or assets. 
*Cash flow from financing activities  - the net flows of cash that are used to fund the company. This includes transactions involving dividends, equity, and debt.