Conceptual and Methodological Indicators of the Enterprise Cash, Cash Flow and Free Cash Flow
Author:
Univ. Prof. Ion STANCU, Ph. D.; Univ. Prof. Dumitra STANCU, Ph. D.
JEL:
G32; D22; L25
DOI:
Keywords:
cash, cash equivalent, cash flow, free cash flow, cost of capital, enterprise value
Abstract:
This article analyzes and brings in professional and scientific debate the complex notions of cash, cash flow and free cash flow, the distinction between net profit and cash flow, and between accrual and cash accounting. To test the feasibility of this analysis, the resulting indicators are subject to a case study on the income statement and balance sheet of a company in the pharmaceutical sector. \r\nThe equality between the components of total cash flow and changes in enterprise cash, the equality between the free cash flow and the free cash flows of the shareholders and lenders, and the equality between enterprise value and the equity and long-term debt have encouraged the authors to support this analytical approach. \r\nIn accordance with the literature, our findings offer a good understanding and a homogeneous determination of the complex indicators analyzed.