It is known as Cash Flow (or cash flow , in English) to the statement that reflects how much cash keep someone after expenses, interest and payment to capital. The expression that in the field of Accounting is known as cash flow statement therefore it is a accounting type parameter which offers information regarding the movements that have been made in a given period of money or any of its equivalents.
Operational activities, investments and financing are part of the categories contemplated in the framework of the cash flow statement. He operational cash flow indicates the cash received or invested as a result of the basic activities of the company. He investment cash flow it does the same with respect to the expenses in investments (of capital, acquisitions, etc.), while the financing cash flow considers the cash resulting from the receipt or payment of loans, the issues or repurchase of Actions and the payment of dividends.
When making a projection of these states, the company You can foresee whether you will have the necessary cash to cover your expenses and make a profit. Analyzing the cash flow statement, therefore, is a very important activity for small and medium companies that tend to suffer from lack of liquidity to meet their immediate needs. The cash flow allows forecasts to be made and helps to avoid urgent solutions (such as going to financiers to request short-term and high-cost loans).
It should be noted that the preparation of the cash flow enables the finance management , contributes to decision making and facilitates control of expenses to improve profitability.
When analyzing the financial situation of a company, it is normal to pay special attention to operational and profitable issues, relying on the data obtained from the Income Statement (whose main objective is to inform whether a company produces profits or losses). It is very frequent that this study includes checks with previous years, with objectives that have been pre-established or with the status of other firms in the same sector.
In this way, you can dry conclusions about the financial health of a company which, despite being useful, does not offer the necessary amount of detail and depth. This analysis will not be complete until the evolution of the heritage masses is studied, through the so-called Balance Sheet. It is like that, combining the results of both documents Accountants, which can obtain a broader and clearer perspective of a company's ability to produce financial resources (cash flow) to deal with payments.
It is common for professionals analysis Financial interpret a negative cash flow as a worrying signal about liquidity, a clear warning of an excessive level of indebtedness. For this reason, in recent times there has been a tendency to invest in companies that show a positive and growing result.
Unfortunately, it is very normal for this data to be manipulated in the case of large companies, both for better and for worse. Today, the financial information of companies is public knowledge, thanks to the Internet, and often unfair measures to sink the competition They start through viral-type publications (which spread rapidly across the network) and, if endorsed by an analyst, they will have enough weight to generate doubts and instability. Slander fabricated from false or inaccurate data is often sufficient reason to affect the success of a company in the bag, even for a short time.