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

Airbus revised its outlook for free cash flow before mergers and acquisitions and customer financing to below last year’s level of €2.95 billion, from on par with 2017. — Robert Wall, WSJ, "Airbus’s Big Problem: It Can’t Make Jets Fast Enough for Airlines," 31 Oct. 2018 The cash flow makes clear that O’Rourke’s longshot quest to unseat Cruz, whatever the outcome, has become a national contest of partisan passions drawing media and rooting interest from coast to coast. — Kevin Diaz And Alejandra Matos, San Antonio Express-News, "O’Rourke vs. Cruz draws millions in contributions from outside of Texas," 11 July 2018 The leap in efficiency doubled free cash flow to $1.7 billion. — Shawn Tully, Fortune, "Why Hunter Harrison’s Railroad Revolution Will Outlive Him at CSX," 20 Jan. 2018 On days when my cash flow is low, thank goodness for my sister, who is always willing to lend a helping hand. — Alicia Harper, Redbook, "Don't Judge Me Because...I Still Go Clubbing," 30 Nov. 2011 Though projections that showed enormous deficits and cash flow problems have been erased for now, the city will continue reporting to the oversight board. — Jenna Carlesso, Courant Community, "Oversight Board Approves Budget, End-Of-Year Subsidy For Hartford," 7 June 2018 Asset Sales Parente had gained praise in financial markets for plans to sell assets to cut debt, reducing costs, recovering cash flow and implementing a new and profitable fuel price policy. — Fortune, "Petrobras CEO Pedro Parente Resigns as Strikes Take Down Market Favorite," 1 June 2018 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

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

4 Dec 2018

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The first known use of cash flow was in 1954

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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