Cash outflow

Cash outflow is the amount of cash that a business disburses. The reasons for these cash payments fall into one of the following classifications:

  • Operating activities. Examples are payments to employees and suppliers.

  • Investing activities. Examples are loans to other entities or expenditures made to acquire fixed assets.

  • Financing activities. Examples are payments to buy back shares or pay dividends.

These general categories of cash flow are located within the statement of cash flows, which is one of the financial statements that a business produces. The amount of cash outflows revealed in the statement of cash flows are for the time period covered by the statement.

The amount of cash outflow can be obscured by record keeping under the accrual basis of accounting, where accruals may be recorded that alter the amount of reported expenditures, even though no cash has been paid. Consequently, it is useful to examine the cash outflow on the statement of cash flows on a trend line, to see if a company is gaining or losing cash. A complete knowledge of cash outflow is needed to ensure that a business has sufficient cash (or can plan to acquire new debt or sell shares) to ensure that it remains in business.