CHAPTER 19Calculation 13: Cash Flow
What It Means
Cash flow is all of a property’s cash inflows less all of its cash outflows during a given period of time. Inflows are counted whether or not they must be included as taxable income, and outflows are counted regardless of deductibility. For example, cash flow is affected by the entire amount of a mortgage payment, even though only the interest portion is deductible. Cash flow is not affected by a depreciation deduction, which is not a cash item.
When you speak about cash flow, you usually mean cash flow before taxes (CFBT), which does not take into account the property’s impact on the owner’s income tax liability. Cash flow after taxes (CFAT) is the CFBT less any tax liability that arises from ...