| Cash flow is the flow of cash generated or used by a company during a specific period. Closely watched by lenders in particular, it increasingly merits its own Statement in a company's financial report, although formats of the statement vary globally.
The term is also used to describe the stream of funds received by a bond holder from the periodic receipt of interest payments.
Conceptually, corporate cash flow is very different from corporate earnings. A company's income statement is compiled on the basis of accrual: it includes sums earned for a specific period which may not have been received, or sums owed which may not have been paid. This working capital is excluded from cash flow: sums owing or owed are not actual cash received or paid.
Cash flow aims to be the more straightforward measure of actual sums paid and received. |
