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Cash flow analysis
Cash flows are often transformed into measures that give information e.g. on a company’s value and situation:
Cash flow notion is based loosely on cash flow statement accounting standards. The term is flexible and can refer to time intervals spanning over past-future. It can refer to the total of all flows involved or a subset of those flows.
Within cash flow analysis, 3 types of cash flow are present and used for the cash flow statement:
The (total) net cash flow of a company over a period (typically a quarter, half year, or a full year) is equal to the change in cash balance over this period: positive if the cash balance increases (more cash becomes available), negative if the cash balance decreases. The total net cash flow for a project is the sum of cash flows that are classified in three areas:
Depreciation*(tax rate) which locates at the end of the formula is called depreciation shield through which we can see that there is a negative relation between depreciation and cash flow.
The sum of the three component above will be the cash flow for a project.
And the cash flow for a company also include three parts:
The sum of the three components above will be the total cash flow of a company.
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