CASH FLOW MANAGEMENT

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Cash Flow Management

Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow (FCF).

ash flow plans in the insurance business may delay the receipt of cash for insurance businesses, but they also likely ensure a higher rate of collection from their insureds, who are usually better able to make small, regular payments rather than large, infrequent payments.

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Key Takeaways


  • Positive cash flow indicates that a company is adding to its cash reserves, allowing it to reinvest in the company, pay out money to shareholders, or settle future debt payments.
  • Cash flow comes in three forms: operating, investing, and financing.
  • Operating cash flow includes all cash generated by a company's main business activities.
  • Investing cash flow includes all purchases of capital assets and investments in other business ventures.
  • Financing cash flow includes all proceeds gained from issuing debt and equity as well as payments made by the company.
  • Free cash flow, a measure commonly used by analysts to assess a company's profitability, represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.