Cash Flow

Cash flow is the movement of money in and out of a business over a given period. It’s a key financial health indicator, as even profitable companies can fail if they experience cash flow shortages.

Categories:

1. Operating Activities: Day-to-day transactions like sales receipts, supplier payments, salaries.

2. Investing Activities: Purchase or sale of long-term assets like equipment, property, or marketable securities.

3. Financing Activities: Cash received from investors, loans, or dividend payments.

Positive vs. Negative Cash Flow:

• Positive Cash Flow: More money coming in than going out.

• Negative Cash Flow: More money going out than coming in.

Importance:

• Supports working capital management.

• Indicates business viability and operational efficiency.

• Essential for strategic decision-making like expansions or fundraising.