Cash flow refers to a stream of revenue or expense that alters a cash account over a specified time frame. Free cash flow (FCF) is a measure of a business’s financial performance. It is calculated as the difference between cash flow and capital expenditures.
Cash inflows result from any of the following three activities: financing, investments or operations. Cash outflows, on the other hand, result from expenses or investments. A statement of cash flows is an accounting statement that shows the amount of income generated and used by the business in a given time period. It is calculated by summing non-cash charges including depreciation, with net income after taxes. The data used in the statement of cash flows are obtained from the business’ balance sheet.
