MEASUREMENT OF CASH FLOW

MEASUREMENT OF CASH FLOW

A cash flow describes a real or virtual movement of money: a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account (wikipedia).

They are two approaches to the measurement or movement in cash flow that is two alternative framework which can be used as a basis for reporting, monitoring or forecasting cash movement they are regarded to as the “cash book and the “cash tank” approaches.

The cashbook approach is so called because it is simply as summary of what a recorded typical corporation cash book is, it therefore reveal that source of cash receipt and the distribution of cash payment.

The cash tank approaches on the other hand concentrate on those management decisions which cause the cash to flow other than on the book keeping consequences of such decision.

The final cash position must be the same irrespective of the approach of measurement used, but it is believed that the financial stability of the corporation believed that the financial stability of the corporation is much more hopeful as a forecasting framework and also as a much a predictor of impending financial difficulties.