Glossary

With over 200 terms in both English and French, our M&A Dictionary is designed to help you better understand the key words and concepts related to the sale oe purchase of a business in Canada.

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Net Cash Flow

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Category: Business Valuation

Definition:

In accounting, net cash flow refers to the total amount of cash generated or consumed by a business during a specific period. It represents the difference between cash inflows and cash outflows and provides insight into the company’s ability to generate positive cash flow from its operational and financing activities. The formula for calculating net cash flow is: Net Cash Flow=Cash Inflows?Cash Outflows. The resulting net cash flow figure can be positive, indicating that the business generated more cash than it used during the period, or negative, suggesting that more cash was used than generated. Positive net cash flow is generally considered favorable, as it indicates the company’s ability to meet its financial obligations, invest in growth opportunities, and build financial reserves. Net cash flow is an essential metric for assessing a company’s liquidity, financial health, and ability to fund its ongoing operations and growth initiatives. It is often analyzed in conjunction with other financial statements, such as the cash flow statement, income statement, and balance sheet, to provide a comprehensive view of a company’s financial performance.