Cash Flow
The net amount of cash and cash-equivalents moving into and out of a household, business, or investment account.
Plain-English Explanation
Cash flow is the lifeblood of financial solvency. Positive cash flow means your cash inflows (salary, business revenue, investment returns) exceed cash outflows (bills, living expenses, debt payments). Negative cash flow occurs when expenses surpass income, depleting savings or creating debt.
Operating Cash Flow = Operating Cash Receipts - Operating Cash Expenses.
Real-World Worked Example
Why Cash Flow Matters for Your Finances
Even profitable companies or high-earning individuals can go bankrupt if they experience severe cash flow bottlenecks where expenses come due before cash is received.
Common Misconception
Cash flow is not identical to profit. A business can report paper accounting profit while suffering negative cash flow due to unpaid customer invoices.