Cash flow is the net amount of cash moving in and out of a business. Positive cash flow means more money coming in than going out. It matters because even profitable businesses can fail if they run out of cash to pay bills, salaries, and suppliers on time.
What is the difference between profit and cash flow?+
Profit is revenue minus expenses (accrual basis — includes non-cash items like depreciation). Cash flow is actual cash received minus cash paid. A company can be profitable on paper but cash-negative if customers pay late or inventory ties up cash.
How do I calculate net cash flow?+
Net Cash Flow = Total Cash Inflows − Total Cash Outflows. Inflows include sales receipts, loan proceeds, investment income. Outflows include operating expenses, loan repayments, capital expenditure, taxes, and dividends.
What is a good cash flow ratio?+
Operating Cash Flow Ratio (Operating CF / Current Liabilities) above 1.0 is healthy — it means the business generates enough cash to cover short-term obligations. Below 0.5 signals potential liquidity problems.