Outbound Cash Flow

The money that moves out of a company’s or an individual account as a result of a transaction is called as outbound cash flow. The examples of outbound cash flow can be the cash paid to the suppliers, the wages given to the employees, material purchased for production and the taxes that are paid on the net income of the company. Whenever a company needs to pay money for something the cash given or paid comes under the account of outbound cash. Every company runs its transaction on basically two types of cash flows the inbound cash flows and the outbound cash flows. For example when a company issues bond or stocks to raise capital for internal transactions the money that is received is an example of the inbound cash flows.

In order to gain profits the total outbound cash flow must be less than the total inbound cash flow of cash flow. This means that the expenses of the company must be less than the income of the company. The calculation of outbound cash flow is very important for a business as it is further used in the calculations of values such as Internal Rate of Return and Net Present Value. Cash out flows can also be used to find out the degree of liquidity and the profitability of a company. For example if the cash outflow becomes greater than the cash inflow the company may need additional financing to save itself from default.

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