cash flow

noun

Definition of cash flow

1 : a measure of an organization's liquidity that usually consists of net income after taxes plus noncash charges against income

2 : a flow of cash especially : one that provides solvency

Examples of cash flow in a Sentence

We were able to maintain a steady cash flow. The company is looking at new ways to generate cash flow.

Recent Examples on the Web

Tesla also must contend with persistently negative cash flow, more than $10 billion in total debt on its books, and looming competition from more experienced auto makers. — Charley Grant, WSJ, "Tesla’s Busy and Worrisome Week," 27 June 2018 Net debt stood at $18 million, with free cash flow of $1.63 billion. — Elizabeth Paton, New York Times, "Chanel Publishes Annual Results for First Time in 108 Years," 21 June 2018 Boeing said its 2018 guidance, capital deployment strategy and commitment to returning free cash flow to shareholders won't change. — Julie Johnsson, chicagotribune.com, "Boeing extends bet on parts, services in $3.25 billion KLX deal," 1 May 2018 WeWork, an office-space-leasing company with negative free cash flow rated Caa1 by Moody’s Investors Service and B+ by S&P Global Ratings, sold $702 million of bonds on Wednesday, and received orders for around three times that amount. — Lisa Lee, Bloomberg.com, "Fearing the Fed, Credit Investors Are Buying More Junk Instead," 27 Apr. 2018 Stock analysts are near unanimous in their belief that Tesla, burdened with persistent negative operating cash flow, will need to raise billions from the capital markets this year to keep going. — Russ Mitchell, latimes.com, "Musk's Tesla faces a cash crunch as it confronts a suddenly skeptical Wall Street," 31 Mar. 2018 Its production problems have weighed on Tesla’s cash flows, leading some analysts to predict that the company will have to raise more money in the markets. — Peter Eavis, New York Times, "Tesla Is Coming to Its Financial Senses. That Has Its Own Risks.," 13 June 2018 Big Oil is expected to report the highest level of free cash flow in 12 years, thanks to a recovery in crude prices and drastic cost cuts. — Mikael Holter, Houston Chronicle, "Statoil shows better days within Big Oil's grasp," 25 Apr. 2018 The company believes the tax law changes will result in up to $1.5 billion of additional cash flow through 2020. — Rye Druzin, San Antonio Express-News, "San Antonio’s Andeavor expands asphalt business with $75 million acquisition," 13 Feb. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'cash flow.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

25 Sep 2018

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More Definitions for cash flow

cash flow

noun

Financial Definition of cash flow

What It Is

Cash flow is simply the cash expected to be generated by an investment, asset or business.

How It Works

As an investor, you buy a dividend-paying stock. You purchase the stock for $10 and the company pays you a $0.50 dividend each year. $0.50 is cash flow to you. You have valued the stock at $10 based on the stream of annual cash flows you receive each year. If the dividend drops to $0.25, the stock will be worth less to you, and if the dividend increases to $0.75, the stock will be worth more.

On a company level, assume a business had a good year and was able to increase the amount of cash flow it generated. It made more than it paid out. The company can either keep the cash to reinvest in future business prospects, or it can distribute the cash to its investors. Anyone who wants to put a price on the company as a whole will see the cash flow it generates and assign a value based on those cash flows.

A Cash Flow Statement is required to be filed with the SEC by every publicly-traded company. By examining it, an investor can track the sources of cash and the uses of cash throughout the covered time period.

Why It Matters

Cash flow should be the #1 priority for every investor. Any asset should eventually generate cash to pay back the capital that the investor has invested.

The value of any asset can be determined in three steps: 1) Estimate the future cash flows the asset will generate for you; 2) Pick an appropriate discount rate to account for the risk you're assuming by investing in the asset; and 3) Calculate the present value of the cash flows from #1 by discounting them to today's dollars using #2.

It is important to note that having temporary negative cash flow is not always a bad thing. If a company is spending more cash than it earns because it is building a more efficient manufacturing plant, for example, the investment should pay off later when the plant generates products that are turned into cash. On the other hand, if a company has negative cash flow because it's overpaid for acquisitions or made other poor investments, then the long-term benefits may never materialize.

Source: Investing Answers

cash flow

noun