Stock Market Glossary
Cash flow
Actual cash flow of a company, adjusted for accounting effects.
In brief: Actual cash flow of a company, adjusted for accounting effects.
Meaning in practice
The operating cash flow shows how much real money the core business generates, the free cash flow after investments shows what is left for dividends, debt repayment or share buybacks. For long-term investors, it is often more meaningful than net profit.
Context for investors and traders
When analysing a company, this term is meaningful only alongside the business model, industry and development across several reporting periods. One-off effects, accounting choices and the corporate cycle can move individual metrics.
How to use this in practice
A robust assessment looks across several reports: revenue quality, operating margin, investment, debt and cash flow can tell a different story from one metric. Changes in the competitive setting also matter more than an isolated snapshot.
What to keep in mind
Compare companies with suitable peers and check whether one-off effects, buybacks or accounting choices shift the metric. A strong number does not automatically explain a share valuation.
