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What is Cash Flow?

Cash flow generally refers to the movement of money into or out of a business, project or any type of financial product. Cash flow is generally measured during a certain period of time and can be used to calculate other things within a company that gives information on the company’s value and situation. Cash flow helps the company to see where goods are needed, how the company is working, and many other factors. If the company has a negative cash flow, then they would need to look into all aspects of the company to find where the bad cash flow is.

Are employee health care insurance premiums considered as a non-operational expense in determining discretionary cash flow?

Case Details: The premiums are paid for by the employer .

This should be considered an operational expense due to the fact that this expense would be part of the company’s overall operating profit. If the person is buying the business, then they should look at the cash flow of the previous owner to see how the cash flow works.

What is the difference between net cash flow and accounting profit?

Cash flow is the movement of cash through the business. The accounting profit is  the company’s total earnings and includes the cost of doing business.

What are the reasons for a negative cash flow balance in a company?

  • If a company spends more than what it receives during a set period of time, then the company is considered to have a negative cash flow.
  • This can also be due to improper inventory planning, which is when the company buys more inventory than they sell.
  • Another thing is high account receivables, which is where even if the company is making a profit, it may have a high sell of items on credit.
  • Another factor is over investing. Over-investing is when a company purchases non-priority items or investments.

Which is better for cash flow, a capital lease or ordinary lease?

The cash that paid for an operating lease will show up as outflow cash. Capital leases also ask for a higher rate, whereas an ordinary lease would not. Ordinary leases generally do not show up in the cash flow of the company, making it a suitable choice for many companies.

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