M&A Glossary

Cash Flow

The amount of cash generated in a business after all expenses, inflows, and outflows of cash.

See Also

Cash flow statement, EBIT, EBITDA, SDE.


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 such as “discretionary” or “operating,” and a specific definition should be given for the 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 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.

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