Cash flow, also called cash flow, is part of the situation balance of a company. In some way, a correct definition of cash flow is the liquidity or cash capacity that an entity has to face short-term obligations.
Therefore, the concept of cash flow is understood as the money that the company has and that provides specific data on income and cash movements. This cash is usually generated through current accounts or checks. And it will be through this money available in the box with which the company will meet the expenses, payments and interests. Based on this, we will know if the company is able or not to generate liquidity.
On the other hand, there are two methods to calculate the cash flow that will help the company to find out if the results are as expected or if they are negative:
- Direct cash flow method: basically cash is used for operations.
- Indirect cash flow method: it is the one that finds out if the company consumes its funds or not to know more about its future viability.