Net Cash/Income How Does Net Cash Flow Term Paper

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Net Cash/Income

How does net cash flow differ from net income and why is that difference relevant to financial decision making?

Net cash flow takes in consideration the changes in short-term assets of an organization. Whenever a cash receipt is made then net cash flow is raised or when a bill or expense is paid then the net cash flow decreases. It is basically a measure of how much cash, or cash equivalents, that the organization has at any given time. Net cash flow can also be forecasted so that the organization can have an idea of how much cash it will hold, or need to hold, in the future.

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Net cash flow, although it is indirectly related, is not necessarily directly related to any measure of profitability. For example, if a company receives a check for a hundred thousand dollars then it would increase net cash flow; even if the receipt was for a project in which they were losing money on. Therefore you can have a positive net cash flow but still have….....

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