Cash flow

Meaning:

Cash flow is the movement of money into and out of a business over a specific time period. It shows how cash is generated and used for business operations, investments, and paying bills.

Example:

If a company earns ₹10,00,000 from sales and spends ₹7,50,000 on expenses, the cash flow shows how much money is left after these transactions.

How to understand Cash Flow:

1. Cash flow is like the heartbeat of a business - it shows whether money is coming in faster than it is going out.
2. Positive cash flow means the business has more money coming in than going out, while negative cash flow means it’s spending more than it’s earning.

Importance of Cash Flow:

• It helps businesses pay for day-to-day expenses like salaries and rent.
• Good cash flow means a business can grow and invest in new opportunities.