Cash flow, as the name suggests, is how money flows in and out of the company. When a company generates positive cash flows, it is able to provide more value for its shareholders. A negative cash flow shows that the company is spending more than it is earning. The cash flow analysis can be done through methods like Debt Service Coverage Ratio (DSCR), Free Cash Flow (FCF) and Unlevered Free Cash Flow (UFCF).
Cash flows can come from operations, investing and financing activities. The analysis of cash flow gives a company a greater understanding into its performance and facilitates it in making informed decisions.