What is meant by the term cash flow?
Cash flow refers to revenues generated from the basic operating activity of an auxiliary unit. A healthy cash flow balance helps individual operations from regressing into negative cash flow territory. Ideally, operating revenues should cover operating expenditures in order to maintain positive cash flow. The level of decline, stability or growth in cash flow is indicative of management’s reaction to the environment and how well opportunities are capitalized on or contingencies are dealt with. It is important to note that cash flow does not factor commitments such as encumbrances, accounts receivables and/or accounts payable but rather transactions that have been recorded resulting in a real inflow or outflow of cash.
