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What is cash flow?

FinanceLesson on requestFree to read

Quick answer

Cash flow is the movement of money into and out of a person or business over time. Positive cash flow means more coming in than going out; negative means the reverse. It's a key sign of financial health — even profitable businesses can fail if cash runs short.

Key things to understand

  1. It tracks actual money in vs money out over a period.
  2. Positive cash flow funds bills, growth, and emergencies.
  3. A business can be profitable on paper yet run out of cash.
  4. Managing the timing of income and expenses is crucial.

People also ask

What is cash flow in simple terms?
The money flowing in and out over time; positive means you're taking in more than you spend.
Why is cash flow important?
Without enough cash on hand, even a profitable business can't pay its bills and may fail.
What's the difference between profit and cash flow?
Profit is revenue minus costs on paper; cash flow is the actual timing of money moving in and out.