In modern conditions, financial management inDue to the limited financial resources is extremely important for almost any enterprise. Ultimately, its competitiveness and business success depend on the efficiency with which the organization controls and directs cash flows. Analysis of this indicator plays a big role in assessing the financial position of the company.
The concept and essence of cash flow
Generally this economic term itself occursfrom the English phrase "cash flow", which can be translated as "cash flow". Cash flows represent the movement of the enterprise’s finances over a specific time interval. In other words, these are differences between receipts and payments for a specific period. With the help of this indicator, it is possible to identify exactly how money flows, which are not always taken into account when determining profits: tax payments, investment expenses, loan payments, taxes from profits, etc. For a more complete disclosure of the essence of this term consider the classification of its constituent parts.
Types of cash flow
1. Depending on the scale of service business processes:
- Across the enterprise. This is the most general form, which includes all inflows and outflows of finances in a given organization.
- By structural units. The latter can also be centers of responsibility.
- For specific business transactions. It is the primary object of control of monetary resources.
2. Depending on the type of business, cash flows are:
- on operating activities.Associated with payments to suppliers and third-party service providers related to production activities. This includes the salary of the personnel involved in the operational process, as well as the corresponding tax payments. At the same time, this type of cash flow shows revenues from the sale of goods and tax authorities in the event of recalculation of overpaid obligatory payments;
- on investment activities.It includes receipts and payments from financial and real investment, as well as income from the sale of intangible assets and outgoing fixed assets, rotation of investment portfolio instruments and the result of other similar operations;
- on financial activities.This type is associated with the movement of money related to the attraction of loans, loans, additional share or share capital, payment of dividends and interest on deposits, etc.
3. By focus or end result:
- positive. This is a collection of all revenues from each type of economic activity. As an analogue, they also use the expression “cash flow”;
- negative. The total amount of all payments in the process of the enterprise. In other words, it is “cash outflow”.
4. According to the method of calculating the amount of cash flow is:
- clean. Represents the difference between all receipts and expenditures;
- gross. It characterizes all positive and negative flows for a specific period in question.
5. In terms of sufficiency:
- excess. Revenues exceed the company's need;
- in short supply. The inflow of money is below the real needs of the enterprise.
6. According to the method of evaluation over time, cash flows are:
- Present, reduced to the current moment;
- Future, reduced in value to a specific upcoming period.
7. By continuity of formation:
- regular (usually it is associated with operating activities);
- discrete (the result of one-time business transactions, such as the purchase of a license, gratuitous assistance, the acquisition of a property complex, etc.).
8. According to the stability of the time intervals during which they are formed, regular cash flows are:
- Regular with uniform intervals of time within the period under consideration. An example is the annuity.
- Regular with irregular time intervals within the same period (for example, leasing payments with a special payment schedule).
The above classification makes it possible to more fully and purposefully carry out planning, accounting and analysis of cash flows of the enterprise, regardless of the scope of its activities.
