Net Cash

Loading the player...

What is 'Net Cash'

Net cash is a company's total cash minus total liabilities when discussing financial statements. Net cash is commonly used in evaluating a company's cash flow, and can refer to the amount of cash remaining after a transaction has been completed once all charges and deductions related to the transaction have been subtracted.


Net cash may also be considered the short form when referring to net cash per share as it relates to stock investing. The term can be modified to distinguish the function of the funds, such as using net cash flow when describing incoming funds received over a particular amount of time. Investors can use net cash to help determine whether a company's stock offers an attractive investment opportunity, and may be used in conjunction with other measures to gauge the company's overall liquidity.

Net cash refers to the amount of liquid funds gained or lost due to the completion of a single transaction, or multiple transactions, after all obligations and liabilities are met. Obligations can include, but are not limited to, standard operating costs, payments on debts and investment activities. The calculating of net cash starts by determining the amount of receipts during a particular time, often referred to as the gross. Once totaled, all obligations paid from those funds are removed, leaving the net cash amount as the remainder.

Net Cash Flow

Net cash flow refers to the gain or loss of funds over a period of time after all debts are paid. When a business has a surplus of cash after meeting all of the business' operating costs, it is referred to as having a positive cash flow. If the company is sending out more funds for obligations than it is earning through sales or other transactions, it is referred to as a negative cash flow.

A negative cash flow does not mean a company is unable to pay all of its obligations, only that the amount of cash brought into the company was not enough to cover the obligations for the same time period. If other savings vehicles are liquidated to meet the obligation, or additional debt is accrued that does not involve the receipt of a lump sum deposit, a company can meet all of its obligations while maintaining a negative cash flow.

Analysis of Net Cash

Most people associate positive events with increases in net cash, which can be examined to provide insight into a company’s financial health. This can include profits made through the production of goods or providing of services as well as investment income. Certain activities may result in a positive cash flow that may not reflect positively on a company’s financial health, such as money received as a result of incurring a new debt or activities associated with a lump-sum loan deposit.