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Cash Flow

Cash Flow (Definition)

Cash flow refers to the net amount of cash and cash equivalents moving into and out of a business.

Key aspects of cash flow include:

  1. Measures a companys liquidity and ability to meet short-term obligations
  2. Can be positive (more cash coming in than going out) or negative
  3. Divided into operating, investing, and financing activities
  4. Crucial for day-to-day operations and long-term business sustainability
  5. Used to assess a companys financial health and investment potential
  6. Can differ from profit due to non-cash expenses and timing of transactions
  7. Effective cash flow management is essential for business growth and survival

Understanding and managing cash flow is critical for maintaining financial stability and making informed business decisions.