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1、本科毕业论文（设计）外 文 翻 译原文：Cash flow is a Fact. Net income is just an opinionNet income is just an opinion, but cash flow is a fact There is a financial and accounting maxim which, although it is not absolutely true, comes very close to it and which it is a good idea to remember: “Net income is just an opi
2、nion, but cash flow is a fact”.Still today, many analysts view net income as the key and only truly valid parameter for describing how a company is doing. According to this simple approach, if the net income increases, the company is doing better; if the net income falls, the company is doing worse.
3、 It is commonly said that a company that showed a higher net income last year “generated more wealth” for its shareholders than another company with a lower net income. Also, following the same logic, a company that has a positive net income creates value and a company that has losses destroys value
4、. Well, all these statements can be wrong.Other analysts “refine” net income and calculate the so-called “accounting cash flow”, adding depreciation to the net income1. They then make the same remarks as in the previous paragraph but referring to “cash flow” instead of net income. Of course, these s
5、tatements too may be wrong.The classic definition of net income (revenues for a period less the expenses that enabled these revenues to be obtained during that period), in spite of its conceptual simplicity, is based on a series of premises that seek to identify which expenses were necessary to obta
6、in these revenues. This is not always a simple task and often implies accepting a number of assumptions. Issues such as the scheduling of expense accruals, the treatment of depreciation, calculating the products cost, allowances for bad debts, etc., seek to identify in the best possible manner the q
7、uantity of resources that it was necessary to sacrifice in order to obtain the revenues. Although this “indicator”, once we have accepted the premises used, can give us adequate information about how a company is doing, the figure obtained for the net income is often used without full knowledge of t
8、hese hypotheses, which often leads to confusion.Another possibility is to use an objective measure, which is not subject to any individual criterion. This is the difference between cash inflows and cash outflows, called cash flow in the strict sense: the money that has come into the company less the
9、 money that has gone out of it. Two definitions of cash flow in the strict sense are used: equity cash flow and free cash flow. Also, the so-called capital cash flow is used. Generally speaking, it can be said that a company is doing better and “generates wealth” for its shareholders when the cash f
10、lows improve. In the following section, we will take a closer look at the definitions of these cash flows.Accounting cash flow, equity cash flow, free cash flow and capital cash flowAlthough the financial press often gives the following definition for accounting cash flow:accounting cash flow = Prof
11、it after Tax (PAT) + depreciation We will use three different definitions of cash flow: equity cash flow (ECF), free cash flow (FCF) and capital cash flow (CCF).Equity cash flow (ECF) is the money that remains available in the company after tax, after having covered capital investment requirements a
12、nd the increase in working capital requirements（WCR), after having paid financial expenses, after having repaid the debts principal, and after having received new debt.The ECF represents the cash available in the company for its shareholders, which shall be used for dividends or share repurchases. T
13、he equity cash flow in a period is simply the difference between cash inflow and cash outflow in that period.equity cash flow = cash inflows - cash outflows in a periodWhen making forecasts, the forecast equity cash flow in a period must be equal to forecast dividends plus share repurchases in that
14、period.Free cash flow (FCF) is the cash flow generated by operations after tax, without taking into account the companys debt level, that is, without subtracting the companys interest expenses. It is, therefore, the cash that remains available in the company after having covered capital investment r
15、equirements and working capital requirements, assuming that there is no debt.The FCF is the companys ECF assuming that it has no debt. Free cash flow = equity cash flow if the company has no debtIt is often said that the FCF represents the cash generated by the company for the providers of funds, th
16、at is, shareholders and debt holders. This is not true, the parameter that represents the cash generated by the company for its shareholders and debt holders is the capital cash flow.Capital cash flow (CCF) is the cash flow available for debt holders plus the equity cash flow. The cash flow for debt holders consists of the sum of the interest payments plus repayment of the principal (or less the increase in the principal).Capi
