The cash flow (CF) shows the surplus of payments over disbursements (or vice versa) and thus the financial strength of a company.
These financial resources are theoretically available to the company for investments, debt repayment or even for the distribution of profits to shareholders. There are several methods to determine the cash flow.

The direct method calculates the cash flow based on the cash flows:
However, internal company data is required to determine the direct cash flow of a company.

Cash-effective income
– cash-effective expenses
= Cash flow

The so-called indirect method for determining the cash flow is therefore more widespread. This is based on the annual result of the company shown in the income statement.

Annual result
+ Depreciation, as it is not cash-effective
– Acquisitions of fixed assets (liquidity flows out)
+ Increase in long-term provisions (the build-up of provisions/liabilities has a positive effect on the cash flow, as the liquidity is available to the company for longer)
– Reduction of long-term provisions (reduction means that the company pays the debts, the money flows out)
= Cash flow

A far more detailed calculation of the cash flow is shown in the following diagram:
Annual result of the company
+ Depreciation
+/- Change in receivables from deliveries & services
+/- Change in other assets
+/- Tax receivables/liabilities
+/- Change in active accruals
+/- Change in provisions
+/- Change in tax provisions
+/- Changes in liabilities from deliveries & services
+/- Changes in liabilities from social security

= operating cash flow

+/- Bank liabilities
+/- Shareholder loans
+/- Loans from third parties

= Cash flow from financing

+/- Cash flow from investments

Total cash flow (operating, financing, investment)

Calculation of the cash flow from financing:
Fixed assets previous year
– Depreciation
+/- Increase / decrease in fixed assets [corresponds to cash flow from financing]
= Inventory current year

A characteristic of risks in companies is the decrease in cash flow with a simultaneous increase in liabilities.