Cash flow refers to the movement of money into and out of a business over a specific period. It shows how well a company manages its cash to fund operations, pay expenses, invest in growth, and meet financial obligations. Positive cash flow means a business has more money coming in than going out, while negative cash flow indicates the opposite.

There are three main types of cash flow:

1. Operating cash flow – money generated from core business activities, like sales and services.

2. Investing cash flow – cash related to the purchase or sale of assets, such as equipment or property.

3. Financing cash flow – funds from loans, investor contributions, or payments to shareholders.

Monitoring cash flow is essential for business success. Even profitable companies can face financial trouble if they run out of cash to pay bills or invest in operations. Cash flow statements, typically prepared monthly or quarterly, help business owners and accountants track financial health and plan ahead.

Improving cash flow can involve speeding up receivables, managing inventory, and controlling expenses. In short, cash flow is a key indicator of a company’s financial strength and long-term sustainability. Without healthy cash flow, a business cannot survive—even if it’s profitable on paper.