Cash Flow

Financial stability depends on a positive Cash Flow and Cash balance. The Cash Flow from Operations is calculated by adding Non-Cash items to Earnings. Total Cash Flow adds Finance and Investments.

To avoid a possible default, a Company must maintain a positive Cash Flow and Net Cash balance. The Net Cash position assists in determining the financial health and stability of a Company. Operating Cash Flow is calculated by taking a Company’s Net Earnings, then adding back the various non-cash items, principally Depreciation, Amortization and changes in Working Capital and CAPEX. In the Cash Flow Statement there is Operating Cash Flow, then there is Cash Flow from Finance and Cash Flow from Investments. Cash Flow is critical in evaluating the solvency of a Company, to avoid calling in the creditor. As the Shareholders will always be last in line.