The competitiveness of an organization really depends on how it controls the direction of cash flows. When assessing the financial position of an enterprise, this indicator plays a very important role. There are different types of cash flows.
What is Cash Flow?
Translated from English, this economic term stands for "cash flow". In fact, cash flow is the process of movement of the company's financial resources over a certain time period. This refers to the difference between payments and receipts of money for a certain period. This indicator is extremely important, as it helps to identify how the movement of funds that were not taken into account when making a profit is carried out. We are talking about tax payments, loan payments, etc.
Main types of cash flows
There are many classifications of cash flows. Depending on the scale of servicing the business processes of the flow, they are divided into those that are distributed throughout the enterprise, by structural divisions (responsibility centers) and specific operations (the primary object of resource control).
Also, cash flows differ by type of economic activity. They can be associated with payments (operating activities), with loans and raising additional funds (financial activities), or represent payments from investments (investment activities).
Depending on the end result, cash flows are negative and positive. This is the inflow and outflow of finance. According to the level of sufficiency, this indicator is divided into excess and deficit. Cash flows are classified into future and present using the time-based valuation method.
Often companies talk about net or gross cash flow. It is customary to call the net flow the difference between the receipt and expenditure of funds. Gross cash flow is all negative and positive flows for a given period.
Such an indicator can be associated with operating activities or be the result of single business transactions. In the first case, we are talking about a regular cash flow, and in the second - about a discrete one.
Cash flows can be generated over different time intervals. Depending on the stability of these intervals, they are divided into regular at regular intervals (annuity) and regular at irregular time intervals (lease payments with a special payment schedule). The above classification allows for a more in-depth study and analysis of the cash flows of various enterprises.
