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Cash Flow

Cash flow is the amount of cash derived over a certain period of time from an income-producing property. A positive cash flow is used to pay the expenses of the income-producing property. A negative cash flow can not be used to pay the expenses of the income-producing property, because there is no money available. A negative cash flow usually requires the input of extra money from the owner.

The cash flow is measured by the amount of cash a company gained or lost during an accounting period, and adjusted for any previous accounting for accruals and other non-cash transactions. It is calculated as follows: earnings after interest and taxes, less preferred dividend if applicable, with depreciation added back. It is possible for a company to report an operating profit while incurring a loss of cash for the same period, as well as reporting an operating loss while incurring an increase in cash flow.