Cash Flow
The measure of money coming in and money going out over a certain period of time
Cash flow refers to the inflow and outflow of cash in a business over a specific period of time. It involves the movement of money into and out of an organization, primarily through cash and cash equivalents, such as bank accounts, short-term investments, and marketable securities. Cash flow is an important concept for businesses, as it provides a measure of a company’s ability to pay its bills, invest in new projects, and meet financial obligations.
There are several types of cash flows in a business, including operating cash flow, investing cash flow, and financing cash flow. Operating cash flow refers to the cash generated from a company’s core operations, such as sales and expenses. Investing cash flow involves the purchase or sale of long-term assets, such as property or equipment. Financing cash flow pertains to the movement of cash through financing activities, such as issuing or repaying debt, issuing stock, or paying dividends.
A cash flow statement is a financial statement that provides information about a company’s cash inflows and outflows during a specific period. It shows the net change in a company’s cash balance between the beginning and end of the period and is an important tool for investors and creditors to understand a company’s financial health.
Effective cash flow management is critical for businesses to maintain liquidity and operate efficiently. Business owners should regularly monitor their cash flow and take steps to improve it by managing their cash inflows and outflows, optimizing their working capital, and building strong relationships with creditors and customers.
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