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Net Cash Flow


Question: Net Cash Flow

What is net cash flow?


If you look at the cash budget, you will see that net cash flow is the difference between cash payments and cash receipts on a monthly basis. Generally, if a company has a strong and positive net cash flow month after month, it is considered to be financially strong, at least in the short-term.

Net Cash Flow = Cash Receipts - Cash Payments (during a period of time)

Another way to look at net cash flow is to consider the Statement of Cash Flows and its three different parts. The Statement of Cash Flows has three parts: Cash Flows from Operating Activities, Cash Flows from Investing Activities, and Cash Flows from Financing Activities. When you develop the Statement of Cash Flows, the answer you arrive at is Net Cash Flows for the firm. You arrive at this answer by adding the results from each of the three parts of the statement.

Net cash flow = Cash Flows from Operating Activities + Cash Flows from Investing Activities + Cash Flows from Financing Activities


Net Cash Flows = CFO + CFI + CFF

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