Cash Flow has many uses in both operating a business and in performing financial analysis. In fact, it’s one of the most important metrics in all of finance and accounting.

The most common cash metrics and uses of CF are the following:

• Net Present Value – calculating the value of a business by building a DCF Model and calculating the net present value (NPV)
• Internal Rate of Return – determining the IRR an investor achieves for making an investment
• Liquidity – assessing how well a company can meet its short-term financial obligations
• Cash Flow Yield – measuring how much cash a business generates per share, relative to its share price, expressed as a percentage
• Cash Flow Per Share (CFPS) – cash from operating activities divided by the number of shares outstanding
• P/CF Ratio – the price of a stock divided by the CFPS (see above), sometimes used as an alternative to the Price-Earnings, or P/E, ratio
• Cash Conversion Ratio – the amount of time between when a business pays for its inventory (cost of goods sold) and receives payment from its customers is the cash conversion ratio
• Funding Gap – a measure of the shortfall a company has to overcome (how much more cash it needs)
• Dividend Payments – CF can be used to fund dividend payments to investors
• Capital Expenditures – CF can also be used to fund reinvestment and growth in the business