Cash flow

DEFINITION of Cash flow

Cash flow refers to the amount of money coming into and going out of a company’s accounts, as reported in earnings announcements.

WHAT IT IS IN ESSENCE

It can refer to a single project or the entire business. It refers to the amount of money coming into and going out of a company’s accounts, as reported in earnings announcements. And can refer to a single project or the entire business. 

Cash flow is the money that is flowing (moving) in and out of your business in a month. Sometimes seems that it only goes one way – out of the business. But it does flow both ways:

  • It is coming in from customers or clients who are buying some products or services. If customers don’t pay at the time of purchase, some of your or company’s cash flow is coming from collections of accounts receivable.
  • Or it is going out of your or company’s business in the form of payments for expenses, like rent or a mortgage, in monthly loan payments, and in payments for taxes and other accounts payable.

HOW TO USE

Some traders like to use it as a means of judging a business’s financial foundations. If there is a large amount of cash coming in, there is more available to reinvest in the business. It can be easier to compare between companies as it isn’t subject to accounting rules. Cash flow isn’t an indicator that a company is profitable. But can indicate its liquidity. Total is calculated by deducting the total costs. And adding incomes over a certain period of time. In order to give the change in cash balance. There are many other types of cash flow depending on which aspect of a business’s cash flow is being calculated.