Retained Cash Flow - Explained
What is Retained Cash Flow?
Written by Jason Gordon
Updated at September 18th, 2021
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Table of Contents
What is Retained Cash Flow?How is Retained Cash Flow Used? Academic Research on Retained Cash FlowWhat is Retained Cash Flow?
Retained cash flow (RCP) refers to the total amount of cash that a company has at the end of a financial period, this includes the amount available in cash and cash equivalent. RCP gives an insight into the net increase or decrease of cash that a company has at the beginning of one accounting period to the next. The retained cash flow of a company is an important metric for evaluating the financial success of the company. Retained cash flow is the amount left to a company after all expenses and debt obligations have been paid. RCP is also the amount left in a company after outgoing cash has been deducted from cash inflow.
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How is Retained Cash Flow Used?
RCP is an important metric used in gauging the financial status of a company, it provides an insight into the revenue and expenses of a company and the efficiency of the companys budget. Retained cash flow indicates that a company is financially healthy and will attract sustainable future growth. Companies with sufficient retained cash flow reinvest it in net present value (NPV) projects to generate more revenue for the business. Oftentimes, the retained cash flow of a company is positive, there are however some cases when the amount of cash and cash equivalents available in a company will be minimal or almost negative.