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Definition of cash flowcash flowAn obvious but at the same time elusive term that refers to cash Cash flowcash received and paid over time. Cash flowIn investments, it represents earnings before depreciation , amortization and non-cash charges. Cash FlowIn investments, NET INCOME plus DEPRECIATION and other noncash charges. In this sense, it is synonymous with cash EARNINGS. Investors focus on cash flow from operations because of their concern with a firm's ability to pay dividends. cash flowthe receipt or disbursement of cash; when related
Related Terms:NPV (net present value of cash flows)Same as PV, but usually includes a subtraction for an initial cash outlay. PV (present value of cash flows)the value in todayâ€™s dollars of cash flows that occur in different time periods. Cash flow after interest and taxesNet income plus depreciation. Cash flow coverage ratioThe number of times that financial obligations (for interest, principal payments, Cash flow from operationsA firm's net cash inflow resulting directly from its regular operations Cash flow matchingAlso called dedicating a portfolio, this is an alternative to multiperiod immunization in Cash flow per common sharecash flow from operations minus preferred stock dividends, divided by the Cash flow time-lineLine depicting the operating activities and cash flows for a firm over a particular period. Cash-flow break-even pointThe point below which the firm will need either to obtain additional financing Discounted cash flow (DCF)Future cash flows multiplied by discount factors to obtain present values. Discretionary cash flowcash flow that is available after the funding of all positive NPV capital investment Equivalent annual cash flowAnnuity with the same net present value as the company's proposed investment. Expected future cash flowsProjected future cash flows associated with an asset of decision. Free cash flowscash not required for operations or for reinvestment. Often defined as earnings before Incremental cash flowsDifference between the firm's cash flows with and without a project. Nominal cash flowA cash flow expressed in nominal terms if the actual dollars to be received or paid out are given. Operating cash flowEarnings before depreciation minus taxes. It measures the cash generated from Real cash flowA cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash Scheduled cash flowsThe mortgage principal and interest payments due to be paid under the terms of the Statement of cash flowsA financial statement showing a firm's cash receipts and cash payments during a Statement-of-cash-flows methodA method of cash budgeting that is organized along the lines of the statement of cash flows. CASH-FLOW STATEMENTA statement that shows where a companyâ€™s cash came from and where it went for a period of time, such as a year. CASH FLOWS FROM FINANCING ACTIVITIESA section on the cash-flow statement that shows how much cash a company raised by selling stocks or bonds this year and how much was paid out for cash dividends and other finance-related obligations. CASH FLOWS FROM INVESTING ACTIVITIESA section on the cashflow statement that shows how much cash came in and went out because of various investing activities like purchasing machinery. CASH FLOWS FROM OPERATIONSA section on the cash-flow Stockholdersâ€™ equity statement that shows how much cash came into a company and how much went out during the normal course of business. Cash Flow statementA financial report that shows the movement in cash for a business during an accounting period. Discounted cash flow (DCF)A method of investment appraisal that discounts future cash flows to present value using a discount rate, which is the risk-adjusted cost of capital. Statement of Cash FlowsOne of the basic financial statements; it lists the cash inflows and cash outflows of the company, grouped into the categories of operating activities, financing activities, and investing activities. The Statement of cash flows is prepared for a specified period of time. cash flow from operating activities, or cash flow from profitThis equals the cash inflow from sales during the period minus the cash statement of cash flowsOne of the three primary financial statements discounted cash flow (DCF)Refers to a capital investment analysis technique free cash flowGenerally speaking, this term refers to cash flow from negative cash flowThe cash flow from the operating activities of a business operating cash flowSee cash flow from operating activities. Free Cash FlowThe funds available for distribution to the capital providers of the Operating Cash FlowIncome available after the payment of taxes, plus the value of the Discounted cash flowA technique that determines the present value of future cash Statement of cash flowsPart of the financial statements; it summarizes an entityâ€™s cash statement of cash flowsFinancial statement that shows the firmâ€™s cash receipts and cash payments over a period of time. Adjusted Cash Flow Provided by Continuing Operationscash flow provided by operating Cash Flow Provided by Operating ActivitiesWith some exceptions, the cash effects of transactions Cash Flow Provided or Used from Financing Activitiescash receipts and payments involving Cash Flow Provided or Used from Investing Activitiescash receipts and payments involving Cash Flowâ€“toâ€“Income Ratio (CFI)Adjusted cash flow provided by continuing operations Cash Flow ForecastAn estimate of the timing and amount of a company's inflows and outflows of money measured over a specific period of time typically monthly for one to two years then annually for an additional one to three years. Discounted Cash FlowTechniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flows from the project. ADF (annuity discount factor)the present value of a finite stream of cash flows for every beginning $1 of cash flow. fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. PPF (periodic perpetuity factor)a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity. Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity Asset-based financingMethods of financing in which lenders and equity investors look principally to the Asset swapAn interest rate swap used to alter the cash flow characteristics of an institution's assets so as to Average lifeAlso referred to as the weighted-average life (WAL). The average number of years that each Basket optionsPackages that involve the exchange of more than two currencies against a base currency at Business riskThe risk that the cash flow of an issuer will be impaired because of adverse economic Call riskThe combination of cash flow uncertainty and reinvestment risk introduced by a call provision. Capitalization ratiosAlso called financial leverage ratios, these ratios compare debt to total capitalization Cash cowA company that pays out all earnings per share to stockholders as dividends. Or, a company or CFATcash flow after taxes. Changes in Financial PositionSources of funds internally provided from operations that alter a company's Common stock ratiosRatios that are designed to measure the relative claims of stockholders to earnings Conventional projectA project with a negative initial cash flow (cash outflow), which is expected to be Coverage ratiosRatios used to test the adequacy of cash flows generated through earnings for purposes of Dates conventionTreating cash flows as being received on exact dates - date 0, date 1, and so forth - as DCFSee: Discounted cash flows. Dedication strategyRefers to multi-period cash flow matching. Dedicating a portfolioRelated: cash flow matching. Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the DepreciationA non-cash expense that provides a source of free cash flow. Amount allocated during the Discounted payback period ruleAn investment decision rule in which the cash flows are discounted at an DistributionsPayments from fund or corporate cash flow. May include dividends from earnings, capital Dividend discount model (DDM)A model for valuing the common stock of a company, based on the Dollar-weighted rate of returnAlso called the internal rate of return, the interest rate that will make the Economic incomecash flow plus change in present value. Effective convexityThe convexity of a bond calculated with cash flows that change with yields. Effective durationThe duration calculated using the approximate duration formula for a bond with an End-of-year conventionTreating cash flows as if they occur at the end of a year as opposed to the date Equity swapA swap in which the cash flows that are exchanged are based on the total return on some stock Financial riskThe risk that the cash flow of an issuer will not be adequate to meet its financial obligations. First-callWith CMOs, the start of the cash flow cycle for the cash flow window. Forward coverPurchase or sale of forward foreign currency in order to offset a known future cash flow. Funds From Operations (FFO)Used by real estate and other investment trusts to define the cash flow from Growing perpetuityA constant stream of cash flows without end that is expected to rise indefinitely. Internal growth rateMaximum rate a firm can expand without outside source of funding. Growth generated Internal rate of returnDollar-weighted rate of return. Discount rate at which net present value (NPV) Intrinsic value of a firmThe present value of a firm's expected future net cash flows discounted by the Liability funding strategiesInvestment strategies that select assets so that cash flows will equal or exceed Liability swapAn interest rate swap used to alter the cash flow characteristics of an institution's liabilities so Macaulay durationThe weighted-average term to maturity of the cash flows from the bond, where the Market capitalization rateExpected return on a security. The market-consensus estimate of the appropriate Multiple rates of returnMore than one rate of return from the same project that make the net present value Net present value (NPV)The present value of the expected future cash flows minus the cost. Net salvage valueThe after-tax net cash flow for terminating the project. Operating exposureDegree to which exchange rate changes, in combination with price changes, will alter a Other sourcesAmount of funds generated during the period from operations by sources other than
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