It becomes of high importance that we look critically into the definition of the key points as well as words, which happens to be Cash Flow and Investment. Cash flow can be said to be the activities of the net amount of cash and cash-equivalents being transferred into and out of a business. There is no how a company can be talked about without carefully examining their cash flow activity because it is what helps them create and instill value amongst their various shareholders. Cash flow as an activity comes in majorly three forms and they are Operating, Investing and financing.
Operating Cash Flow
This is a kind of cash flow that entails in totality the cash that was carefully gotten as a result of the business of the company’s transactions or activities. It is worthy at this point to note that all the cash involves in various activities carried out in the Company is referred to as the Operational Cash Flow; it is called operational; because it involves various operations from the company business or organization.
Investing Cash Flow
This is another dimension or aspect of the cash flow activity though most companies, as well as firms, do not fancy this because they feel the cash coming out from their businesses is enough to sponsor the activities of their Businesses or organizations. This involves a process of activities whereby it involves the purchases of capital assets and investment in other Business Ventures. It is worthy to note that here, it’s not a direct operation of a business or organization but carefully deals with the investment of capital assets into other or various business ventures or organizations. One major advantage of this aspect of Cash Flow will make you earn more in a very relaxed State; where you don’t need to stress yourself in the management of the business but just create the required funds needed to start up a business and give to another. Though most times in this form of cash flow it involves documentation as agreements will be made as regards how much will be the percentage of the Investor. In a cash flow such as this it becomes important to explain to the investor on the basis of your SWOT analysis as regards the business or firm so when cases occur where the business is experiencing weakness, it will then become understandable to the Investor.
Financing Cash Flow
These most times sound contradictory as to why it was specified to finance cash flow as if the other system of cash flow does not involve finance as well; many scholars have however thought about it to be a tautology. Finance cash flow involves the finance that was gotten from issuing debt and equity as well as payments made by the company or organization.
It is worthy at this point to know that it is not ventured that are truly profitable when it comes to investing in activities cash flow because there are several things that are supposed to be placed into considerations. For instance, looking out for a way to invest in a firm or company as regards the investment cash flow, it involves you going into critical findings as regards the business and organization. Getting a proposal and ensuring that all documents that involve the transactions are highly secured. As an Investor, you must be careful where and when making an investment.