A company which is doing business has to face several difficulties and in order to run operations smoothly a company has to make payment in cash, these cash payments can be for the variety of reasons. Given below are some of the examples of cash outflow –
Cash Outflow Examples
- Cash outflow for Purchase of raw materials – When the company is into the production line, in order to produce goods the company has to purchase raw materials and when raw materials are purchased in cash then it results in cash outflow for the company.
- Cash outflow for repayment of loan – When the company takes loan it has to be repaid by the company and when company repays it even though it results in the reduction of liabilities it will lead to the outflow of cash as far as the company is concerned.
- Cash outflow for payment to sundry creditors – Companies purchase raw materials and the majority of times it is purchased on credit by the company and when the company pays back to creditors it results in the outflow of cash for the company even if purchase belongs to previous financial year.
- Cash outflow for the purchase of investments – Companies in the course of business also purchases investments in the form of stocks, debentures and another form of financial assets and since payment on the purchase of investments results in payment of cash, it also comes under cash outflow.
- Cash outflow for interest payment – When the company has taken loan or debt from the bank or financial institutions it results in periodical payment of interest to banks or financial institutions and these interest payment involves cash outflow as far as the company is concerned.
- Cash outflow for the purchase of assets – Companies in the normal course of business have to purchase assets like machinery, building, machinery, furniture and fixtures and so on and when the company purchases these assets in cash it results in cash outflow for the company.
- Cash outflow for expenses – When the company is running a business it has to pay various expenses like salaries to employees, rent of premises, repair expenses and other sundry expenses in cash and therefore it results in cash outflow for the company.
As one can see from cash outflow examples that there are several ways in which cash outflow happens and it does not matter whether this cash outflow pertains to this financial year or previous financial year.