About this Course

--- Cash Flow can be calculated by two methods, Direct method and Indirect Method. However, the result will be same. Further, there is difference between Cash Flow and Free Cash flow. Cash Flow is the net cash and cash equivalent that comes in and goes out of a company. Whereas, Free Cash Flow is the amount of cash generated through business operations after capital expenses and operating expenses are paid off. Free cash flows are measured by two ways; Free Cash Flow to Firm and Free Cash Flow to Equity. Free cash flow to firm (FCFF) can be described as the cash that is available with the firm owners to pay off their investors, i.e. for both equity holders and lenders. Whereas, Free Cash flow to equity (FCFE) is the amount of free cash that can be distributed to equity shareholders only in the form of dividends or stock buy backs after all expenses, reinvestments, and debt repayments have been paid off. Cash Budget and Cash Flow are two different concepts. Cash flows represents the actual flows during the past period. Cash Budget is a forecasting tool that tracks all cash receipts and cash payments of an enterprise during a period and helps in assessing working capital requirement

Created by: State Bank of India

Level: Intermediate