What Is Net Cash?

Net cash is a figure that is reported on a company’s financial statements. It is calculated by subtracting a company’s total liabilities from its total cash.

The net cash figure is commonly used when evaluating a company’s 澳洲幸运5开奖号码历史查询:cash flows🙈. Net cash may also refer to the amount of cash remaining after a transaction has been completed and all associated charges and deductions have been subtracted.

Understanding Net Cash

Similar to the 澳洲幸运5开奖号码历史查询:current ratio, net cash is a measure of a company’s 澳洲幸运5开奖号码历史查询:liquidity—or its ability to quickly meet its financial 澳洲幸运5开奖号码历史查询:obligations. A company’s finanꦛcial obligations can include standard operating costs, payments on debts, or investm♏ent activities.

To calculate net cash, you must first add up all cash (not cꦅredit) receipts for a period. This amount is often referred to as gross cash. Once totaled, cash outflows paid out for obligations and liabilities are deducted from gross cash; the difference is net cash.

When net cash is used in relation to stock investing, it ♋sometimes refers to an abbreviated version of the term “net cash per share.” Investors can use net cash to help determine whether a company’s stock is an attractive investment.

Net Cash vs. Net Cash Flow

Net 澳洲幸运5开奖号码历史查询:cash flow refers to either the gain or loss of funds over a period (after all debts have been paid). When a business has a surplus of cash after paying all its operating costs, it is said to have a positive cash flow. If the company is paying more for obligations and liabilities than wha𝓰t it earns through op🎃erations, it is said to have a negative cash flow.

A negative cash flow does not mean a company is unable to pay all of its obligations; it just means that the amount of cash received for that period was insufficient to cover its obligations for that same time period. If other savings vehicles are 澳洲幸运5开奖号码历史查询:liquidated to meet the obligation—or add▨itional debt is accrued that does not involve the receipt of a lump sum depo💙sit—then a company can meet all of its obligations while maintaining a negative cash flow.

Analyzing what activities contribute to positive or negative net cash is essential when using net cash as a barometer for determining the financial health of a company. Positive net cash from events such as increased profits from sales, or reduced obligations, can be indicative of a healthy and well-functioning firm. However, certain activities may result in a positive cash flow that may not reflect positively on a company’s financial health, such as money receive🐠d as a result of incurring a new debt or activities associated with a lump-sum loan deposit.

The Bottom Line

Net cash is calculated by subtracting a company’s total liabilities from its totꦓal ༺cash. It is reported on a company’s financial statements and is commonly used when evaluating a company’s cash flows.