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

The company will be reclassified to continuing operations and will be included in A.P. Moeller-Maersk’s income statement, balance sheet and cash flow statement as part of the Manufacturing & Others segment. — Dominic Chopping, WSJ, "Maersk Drops Offshore Supply Unit Sale," 29 Mar. 2019 When Gil Gildner's big client started paying more slowly and stopped communicating well, cash flow was at stake. — Joyce M. Rosenberg, USA TODAY, "Hard to do: Businesses may need to break up with slow-paying, irritating customers," 2 July 2018 The upshot is, the user can take any one of these policies and slide it up and down from zero to very strong and instantly see the effects on CO2, on a dozen other pollutants, and on cash flow. — David Roberts, Vox, "Climate change policy can be overwhelming. Here’s a guide to the policies that work.," 30 Nov. 2018 Tax cuts have increased cash flows at companies, perhaps reducing the near-term demand for loans. — Emily Flitter, New York Times, "Bank Earnings Climb in Growing Economy, but Lending Doesn’t Keep Pace," 13 July 2018 Unispec was not alone in struggling to manage the lack of cash flow. — Neena Satija, The Seattle Times, "Federal contractors who lost health insurance during shutdown remain in limbo," 28 Jan. 2019 Last year, buyers of first-lien loans were paid 0.83 percentage point above the benchmark London interbank offered rate for every multiple the loans exceeded a measure of borrowers’ cash flow, according to LCD. — Sam Goldfarb, WSJ, "Dwindling ‘Debt Cushions’ Threaten Safety of Leveraged Loans," 25 Jan. 2019 In the design world, entrepreneurs need to be experts not only in design, but also in production, operations, leadership, and financial processes like securing loans, accounting, and cash flow management. — Jessica Andrews, Teen Vogue, "Designer Anita Dongre Talks Dressing Priyanka Chopra, Beyoncé, and Sophie Turner," 14 Mar. 2019 Cuba also suffers from a cash flow problem that further hinders the purchase of international goods — a product of the sanctions but also, critics say, its poor stewardship of the economy. — New York Times, "Hand-Me-Down Plane That Crashed Reflects a Cuban Air Industry in Crisis," 19 May 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

5 Jun 2019

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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