Cash Flow


Cash flow refers to the amount of actual cash that is being generated in the business after all expenses and inflows and outflows of cash.

See Also

SDE, EBIT, EBITDA, income, cash flow statement.


This term may be used in a general sense to encompass various levels of specifically defined cash flows. When the term is used, it should be supplemented by a qualifier (for example, "discretionary" or "operating") and a specific definition in the given valuation context. "Cash flow" is a very loosely used term in M&A to refer to a variety of types of earnings, such as EBIT, EBITDA, or SDE. When cash flow is being used, always ask the user of the term to specify the exact definition to prevent any confusion. Companies can be profitable and still have negative cash flow. Cash flow for a company is tracked on the cash flow statement, although many small to mid-sized businesses do not prepare a cash flow statement.