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Cash Flow

Cash flow is the measure of cash coming into and out of the business bank accounts. Free cash flow is a subset of cash flow and is the amount of cash left over after the business has paid all its daily running expenses and what was spent for capital expenditure. For property investor businesses, capital expenditure involves purchasing vacant land, erecting buildings and renovating existing buildings.

When free cash flow is positive, it indicates that the property investor business is generating more cash than is used to run the business and reinvest in properties to expand its operations. A negative free cash flow number indicates the business is not able to generate sufficient cash to support its operations.

Related topics:

  • Discounted Cash Flows
  • Revenue Multipliers