What is the difference between economic and financial cash flow?

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What is economic and financial cash flow ? In both cases, these are financial statements of a company that allow us to know the liquidity and solvency of the company by measuring the inflow and outflow of money in a given period. However, although both are statements that are related, there is a difference between economic and financial cash flow .

In this post from Moonflow, billing system software, we tell you more about it.

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Definition of economic cash flow

Definition of financial cash flow

Difference between economic and financial cash flow

Tips to improve your economic and financial cash flow

1. Improve your cash management for your operations

2. Optimize your business's collection process

3. Improve your payment management to optimize cash flow



Definition of economic cash flow
The first thing to understand is the definition of each of these states. In the buy targeted email list of economic cash flow , also called free cash flow , we refer to the capacity of a company to generate income from its operations, meet the payment of all its obligations or expenses and have liquidity to freely dispose of.

In this sense, what is left represents the resources available to the company once it has covered all its financial responsibilities. This money can be used for different purposes, such as savings, investment in new projects, company expansion or simply to maintain savings that can cover the business in the event of an unforeseen expense.

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Definition of financial cash flow
As for financial cash flow , this also refers to the money that comes in and out of a company, but related to its financial activities. For example, those that have to do with the loans that the company has, or the payment of debts , among others.

In this scenario, the importance of financial cash flow lies in the fact that it allows us to know whether the company has the capacity to meet its financial obligations over time.

Difference between economic and financial cash flow
As can be seen from both definitions, there are key differences between the two terms of focus, purpose and the components that are taken into account for their calculation.