Syntax error Differentiate between cash flow and free cash flow.

Differentiate between cash flow and free cash flow.

The major differences between cash flow and free cash flow are as follows −

Cash flow

  • Finds operating cash inflow and activities of finance and investments of the business.
  • Net cash inflows are calculated.
  • Liquidity of company is determined.
  • It has broad scope.
  • Operating, investing and finance cash flows are used in calculating cash flows.
  • It gets difficult to find out cash flow when, both more than one cash and non-cash transactions are taken place.
  • Not much time is needed.
  • Used in financial accounting.
  • Income statement is required for calculation purpose.

Free cash flow

  • Finds Prevent value of business.
  • Valuation of business (investors) is calculated.
  • Financial health of the company is determined.
  • Limited scope.
  • EBIT, Capital expenditure, working capital are used in calculations.
  • Calculation of individual parameters is difficult.
  • Depends on available information, time taken is calculated.
  • Calculated in DCF model.
  • Income statements are required for calculating purpose.
Updated on: 2020-09-26T13:34:10+05:30

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