How is net cash flow calculated?

Net cash flow is calculated by determining the difference between cash inflows and cash outflows over a specific period. This measure reflects the actual liquidity position of an entity, as it accounts for all cash received during the period (inflows), such as sales revenue, interest income, and any other forms of incoming cash. Conversely, it also includes all cash spent (outflows), which encompasses operating expenses, capital expenditures, and any other cash payments. By subtracting total cash outflows from total cash inflows, you arrive at the net cash flow, which provides a clear picture of how much cash has been generated or consumed during that time frame. This calculation is essential for assessing financial health, investment capability, and cash management strategies.