Financial cash flow (FCF)

Financial cash flow (FCF) is defined as the cash flow that shows the inflows and outflows of capital of a company as a result of its economic activity.

It is also defined as the sum of the economic cash flow, where you can check the profitability of a project, but without taking into account the financing, and the net financing, where the financing is incorporated.

The financial cash flow tends to be confused with the  profit and loss statement  of a company. This last accounting statement follows the accrual principle, that is, it accounts for the income or expenses in how much they originate, but the cash flow values ​​them as soon as the income is received or the cash outflow occurs. Another difference is that, if we take into account a depreciation of property, plant and equipment, such as any furniture and its amortization, the cash flow, unlike the statement of profit and loss, does not consider it a cash outflow, but that It is charged indirectly in income.

Financial cash flow components

The components that are integrated in the cash flow are the following:

  1. Loss of value in merchandise and raw materials.
  2. Capital provision for personnel expenses.
  3. Losses generated by commercial operations.
  4. Amortization of fixed assets
  5. Subsidies for the purchase of non-financial fixed assets and some capital grants.
  6. Surplus of provisions of taxes, collections of clients or commercial operations.
  7. Low intangible assets and material.
  8. Losses from operations in financial instruments such as short-term debt and credits and all kinds of financial instruments in which the company invests its excess treasury to make its liquidity profitable.
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