How come CFO cover Capex and debt repayment?
Because they both come under CFI and CFF.
Please make me understand this.
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
It is an indicator of good cash flow quality.
The operating cash flow (OCF) is the cash flow component with the most direct impact on the valuation of a company. High-quality cash flow indicates that the company’s underlying economic performance was value-enhancing. Further, it implies that the information calculated and disclosed by the company was a reasonable reflection of economic reality, i.e., the company had high reporting quality.
When examining the cash flow statement, both the industry in which the firm operates and the corporate cycle affect operating cash flows. It is typical for a start-up company to have negative operating and investing cash flows. On the other hand, a mature company should have positive operating cash flows.
Generally, high-quality cash flow is characterized by a positive OCF, which is derived from sustainable sources and is sufficient to cover capital expenditures, dividends, and debt payments. Additionally, high-quality OCF has relatively low volatility in comparison with industry peers. OCF is viewed as being less subjective and hence, less easily manipulated than net income. Significant differences between earnings and OCF or a widening in such differences over time indicate earnings manipulation.