Cash flow
Cash flow, also known as cash flow, is a crucial concept within financial management that describes the movement of money in and out of a business or household. It accurately reflects financial health and operational efficiency.
The role of cash flow in financial management
A cash flow consists of three main components: operating cash flow, investing cash flow and financing cash flow. Operating cash flow measures the income and expenses that result from an entity's core activities. Investing cash flow includes capital expenditures and the sale of assets, while financing cash flow includes loans, equity issuances and dividend payments.
Positive cash flow indicates a sound financial basis, which allows a company to invest and pay off debt. Negative cash flow may indicate financial difficulties. Analysis of cash flow helps make strategic decisions, such as investments, debt management and dividend payments.
