Introduction to Cash Flow

Cash Flow: You can also call it the flow of wealth, the coming and going of wealth. Cash flow is a financial term and in fact, it is a statement in which it shows how is the money coming from a person, organization or company and where it is being used or invested.

When we talk about cash flow in business it shows the money coming in business and going out from business within some fixed time period.

Incoming Cash: Income cash is the money received from customers and clients, other lending rest in exchange for money, etc. It is also called cash generated from the operation of the business.
Outgoing Cash: The money given to repay the expense, rent, interest, tax, and any other business expenses to be purchased or made.

Types of Cash Flow

1. Positive Cash Flow - When cash coming into the business is more than the amount spent in the business.
2. Negative Cash Flow - When the cash coming into the business is less than the amount spent in business.
3. BREAK EVEN Cash Flow - When cash coming into the business and spent in the business, both are equal.

The importance of Cash Flow: It is very important to have a Positive Cash Flow, from a common man to a small company or big business. Positive Cash Flow in business indicates that the expenses of that business are low and income is high, and in such a scenario, that business is successful in earning more profits.

There is a lot of money in small and new businesses because most new businesses or companies do not have cash reserve funds, and as soon as there is a financial crisis, most small businesses or companies Come to the verge of closure.

Things to note about Cash Flow:

• Cash flow is a statement, which tells the pattern of the cash flow of an individual organization or company.
• The Cash Flow Statement exposes the cash transaction performed by a business
• In business, the positive cash flow tells the strength of that business.
• Before investing, the company's cash flow study is part of fundamental analysis.