Cash inflow is very important as far as companies are concerned because cash is the lifeline of any business and without it, a company cannot survive. Cash inflow can come from variety of sources and at the end of financial year a company would ideally want to have positive cash inflow, let’s look at some of the cash inflow examples –
Cash Inflow Examples
- Cash inflow from sales – The first and foremost example of cash inflow is the cash received from the sales done by the company to its customers. Cash sales are the primary source of cash inflow for any company and higher the cash inflow from this source the better it is as far financial position of the company is concerned.
- Cash inflow from the sale of assets – Companies in the course of business keep selling old assets like plant and machinery due to wear and tear and also fixed assets like land and buildings due to the appreciation of the same and this act of company selling assets results in cash inflow for the company.
- Cash inflow from taking loan – Companies take debt or loan from banks and financial institutions for expansion of business and its activities, although loan is a liability as far as the company is concerned but it results in cash inflow for the company.
- Cash inflow from investments – Companies also make investments in stocks, debentures and another form of financial assets and when companies sell or redeem these investments it results in cash inflow for the company.
- Cash inflow from dividends income – When the company has made investments in stocks they are entitled to dividends and when companies declare dividends it results in cash inflow for the company holding stocks.
- Cash inflow from interest income – Companies also park their excess funds into banks or financial institutions which in turn generates interest income for the company and also company receives interest from advances given to other companies and both types of interest will come under cash inflow category.
- Cash inflow from debtors – Companies do not sell all goods for cash rather the majority of times goods are sold on credit and when these debtors repay their debt it results in cash inflow for the company.
As one can see from that there are several ways in which cash inflows comes to the company and it does not matter whether this cash inflow pertains to this financial year or previous financial year.