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How do you compute the cash flows?
Cash flow is the movement of the money in and out of the business which results in high availability of the cash. The cash flow calculation is simple and it is calculated by adding the after tax income and bookkeeping expenses that result in deduction of the items which has not be paid out in cash. The cash flow in few months will be negative only which should not be taken as a negative sign as it won't effect the business much. The cash balance should not go below zero as it will be same as negative balance in the account.
What factors are taken into consideration while computing cash outflows and cash inflows?
The factors which has to be taken into consideration while computing the cash outflows and cash inflows are as follows:-
1) Net income which is provided by the operations.
2) Non-cash expenses
3) Loss and gain on sales on assets.
4) Non-cash current assets and liabilities except payable notes and dividends payable.
5) Cash collection which is the major principle component of the cash flow and it is the actual cash which is
being received during accounting period which has to be taken from the customers
6) Financing which result in the change in size and composition of the equity capital and it also show the activities result of the borrowings of the enterprise.
7) It also includes issue shares and equity instruments.
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