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Cash Flow Concept
The term Cash-Flow, designates the balance
between the capital input and output of a company during a certain
period of time, able to calculate by a construction of a cash flow map.
Usually, and for a matter of practical use, the flows measured are not
strictly from the cash register, but rather the operating transactions
that can be reflected in currency movements in a short time. In this
way, the cash-flow concept begins to include the sales and the costs
(excluding obviously the costs that don’t represent currency movements
as for example the depreciations of facilities and equipments) and not
the receipts and payments.
Cash-Flow Calculation Formula:
CF = R
+ D – Rx
In which CF is cash-flow, RL the net
results, AA the depreciations and other adjustments of value made to
assets and Rx the extraordinary results.
Sometimes, in the cash-flow calculation,
are only used the exploration costs and the exploration profits. In this
case, the result is the exploration cash-flow, which measures the
company’s capacity to generate availabilities through its normal
activity, this is, beyond the expunged of extraordinary events, is also
expunged from the results of the investment and financing policies.
Due to the fact of providing a measure of
the company’s capacity to release monetary means, cash-flow becomes an
excellent indicator of the company’s self financing capacity, this is,
its capacity to perform new investments without the need to appeal to
external financing sources.
Translated from Portuguese
by Susana Saraiva, Portuguese-English and English-Portuguese translation
specialist. Contact: spams@sapo.pt.
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