what is cash flow

Cash flow refers to the movement of money in and out of a company. It is a measure of spending power, similar to free cash flow, working capital, and liquidity. Cash received represents inflows, while money spent represents outflows. A companys cash flow can be categorized as cash flows from operations, investing, and financing. Cash flow is important because it enables a company to meet its existing financial obligations as well as plan for the future. Even profitable businesses can have cash flow issues when faced with badly timed expenses. A business is considered healthy when its cash flow is positive for a prolonged period of time. Cash flow and profit are not the same things, and it’s critical to understand the difference between them to make key decisions regarding a business’s performance and financial health.