Excess Cash Flow

AAA

DEFINITION of 'Excess Cash Flow'

A term used to describe the income derived from mortgages or other assets backing a bond that is in excess of what is needed to retire the bond. The excess cash flow may be passed to investors who purchased a residual interest in the securities or used by the bond issuer to pay out to bond holders.

INVESTOPEDIA EXPLAINS 'Excess Cash Flow'

Excess cash flow usually occurs as a result of overcollateralization in order to improve the borrower's credit rating and lower the lender's default risk. Also, in terms of financial statements, excess cash flow can als refer to available cash left after expenditures and dividends are paid.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Excess Loans

    A loan made by a state chartered or national bank to an individual ...
  3. Cash Flow Loan

    Borrowing cash typically to meet day-to-day operations or acquisitions. ...
  4. Overcollateralization - OC

    The process of posting more collateral than is needed to obtain ...
  5. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  6. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
RELATED FAQS
  1. When looking at my online broker account, I see an account value, cash value and ...

    When looking at some online brokerage accounts, there are a few figures that may be confusing, including account value, cash ... Read Full Answer >>
  2. What is a Ginnie Mae security?

    A Ginnie Mae, or Government National Mortgage Association security, functions similarly to the process of lending someone ... Read Full Answer >>
  3. How often should a small business owner go through a bank reconciliation process?

    Small business owners should go through the bank reconciliation process at least monthly, and many business consultants recommend ... Read Full Answer >>
  4. Why is a company's Cash Flow from Financing (CFF) important to both investors and ...

    A company's cash flow from financing activities (CFF) is important to investors and creditors because it depicts how much ... Read Full Answer >>
  5. What is the formula for calculating free cash flow in Excel?

    Free cash flow (FCF) is used in fundamental analysis to measure the amount of cash a company generates, after accounting ... Read Full Answer >>
  6. How do you calculate free cash flow?

    Free cash flow (FCF) is one of many possible estimates of cash flow for a business. The idea is to find out how much money ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Business Owners: Rules For Qualified Retirement Plans

    Business owners need to take note of how they handle qualified-plan distributions to former employees.
  2. Budgeting

    Should You Pay In Cash?

    Avoiding all forms of plastic payment can do wonders for your stress level and pocket book.
  3. Insurance

    Investing In Securitized Products

    Securitized assets are customizable and have a wide range of yields, making them an attractive asset class.
  4. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  5. Markets

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  6. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  7. Economics

    Do Interest Rate Changes Affect Dividend Payers?

    Interest rate changes have an effect on prices of dividend-rich stocks in interest rate sensitive sectors like utilities, pipelines, telecommunications and REITs.
  8. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  9. Stock Analysis

    Who's The Stronger Stock: Amazon or eBay?

    Learn how revenue, profitability, valuation metrics, active user base and seller ratings measure the success of Amazon and eBay.
  10. Professionals

    Cash Flow Is King: How to Keep it Running

    Why is cash flow so important, and what steps can a business take to improve it?

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!