cash flow

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 Those much larger companies regularly update shareholders on cash flow, debt and other data under federal reporting rules. — Alex Demarban, Anchorage Daily News, "Hilcorp wants finances kept private in Alaska deal with BP, leading to calls for transparency," 11 Nov. 2019 What hasn't changed is that even at $2 billion, GE's free cash flow will be very weak this year. — Brooke Sutherland, chicagotribune.com, "Don’t look now, but GE is getting somewhere," 6 Nov. 2019 Unlike coal plant owners, who have relatively more capital and cash flow, wind and solar generators are finding such long delays lethal to their survival. — Kuwar Singh, Quartz India, "How wind power developers are losing out to red tape in India," 7 Oct. 2019 In October, the company reported that free cash flow went from $4.1 billion a year ago to a negative $2.9 billion in the third quarter, worse than analysts had expected. — Tom Krisher, The Denver Post, "As Boeing suspends 737 Max production, economic ripples begin to spread," 17 Dec. 2019 Another firm with six products in the international pricing index will have an initial revenue loss more than $1 billion, a cash flow equivalent of 10% of its R&D budget. — Susan Peschin, STAT, "International pricing index ‘accomplishes nothing it sets out to do’," 21 Oct. 2019 The reason is predominantly cash flow and funding muscle. — Nisha Ramchandani, Quartz India, "Hiring for early-stage Indian startups doesn’t have to be a hit-and-miss game," 20 Sep. 2019 Gone were the luxury cars, the multiple homes, the steady cash flow. — Alex Prewitt, SI.com, "She Won Athletes' Hearts. And Robbed Them Blind," 19 Sep. 2019 The houses that once stood proud are now crumbling and sky-high taxes mean there is very little cash flow to pay for a team of always-on-call butlers, cooks, and housekeepers. — Annabelle Spranklen, Town & Country, "What It's Really Like to Work at a House Like Downton Abbey Today," 16 Sep. 2019

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

24 Jan 2020

Cite this Entry

“Cash flow.” The Merriam-Webster.com Dictionary, Merriam-Webster Inc., https://www.merriam-webster.com/dictionary/cash%20flow. Accessed 28 January 2020.

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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