Glossary

Cash flow

A company’s cash flow reflects its financial health, showing the rate of return of its various business projects. Cash flow can be used to measure the company's profit and is used to determine the liquidity or convertibility of the company's assets into cash. The operating cash flow ratio indicates the extent of the company's liquidity. It shows how well the cash flow from the operations covers the company’s current liabilities. Free cash flow (FCF) is operating cash flow minus capital expenditures - the cash a company can generate after it has covered its asset base. FCF allows a company to develop new projects, make acquisitions - basically pursue opportunities that enhance shareholder value.