rahavirrat

Rahavirrat, or cash flows, describe the inflows and outflows of cash and cash equivalents over a specified period for an entity. They capture liquidity movements and complement accrual-based accounting by showing actual cash availability. The term is widely used in finance and accounting, with "rahavirrat" being the Finnish equivalent.

A cash flow statement classifies cash flows into three activities: operating (CFO), investing (CFI), and financing (CFF). Operating cash flows include receipts from customers, payments to suppliers and employees, and other cash earnings. Investing cash flows reflect purchases and sales of long-term assets and investments. Financing cash flows show proceeds from borrowing, repayments of debt, and payments to shareholders, such as dividends or share repurchases.

Measurement and methods: Cash flow is measured as cash and cash equivalents at period start and end; the difference is net cash flow. Companies may present CFO using the direct method (explicit receipts and payments) or the indirect method (net income adjusted for non-cash items and working capital changes).

Applications: Cash flow analysis assesses liquidity, funding needs, and resilience. Free cash flow (operating cash flow minus capital expenditures) is often used in valuation and equity analysis. Cash flow is distinct from profit, as timing and non-cash accounting items can create differences.

In practice, rahavirrat are reported in the cash flow statement under IFRS and GAAP, providing a liquidity-focused view that complements the income statement and balance sheet.